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Bai Hakimbu Vs. Dayabhai Rugnath - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberSecond Appeal No. 636 of 1936
Judge
Reported inAIR1939Bom508; (1939)41BOMLR1104
AppellantBai Hakimbu
RespondentDayabhai Rugnath
DispositionAppeal dismissed
Excerpt:
.....property act (iv of 1882), section 53-decree-holder becomes auction-purchaser of judgment-debtor's property-transfer of property by judgment-debtor after passing of decree and prior to auction sale-whether such auction-purchaser entitled to benefit of section 53-suit against creditor who is auction purchaser-whether creditor should defend on behalf of all creditors- debtor's right to prefer creditors-conveyance of property to one creditor to avoid execution of other creditor's decree-reservation of benefit by debtor when preferring creditor-validity of transfer-whether transfer valid so far as there is consideration.; the order of attachment before judgment should be promulgated in the manner described in order xxi, rule 54(2), civil procedure code, 1908, unless all the processes of..........they allowed a decree to be passed against them whereby the attachment was continued. but in that suit fidaali's mortgagee rights were not sought to be attached. in his application the defendant prayed for the attachment of the property itself as belonging to both fidaali and nuralli. but nuralli had already become the sole owner of the property and had mortgaged it to fidaali for rs. 2,500. it is argued that thereby the property was divided into nuralli's equity of redemption and fidaali's mortgagee rights, and both of them must be deemed to have been attached by the attachment of the property itself. even if it were so, the property itself was never actually attached. under order xxxviii, rule 7, the attachment before judgment must be effected in the same manner as the attachment in.....
Judgment:

Lokur, J.

1. The appellants' father, who was the plaintiff, died during the pendency of the suit, and the appellants were brought on record as his heirs and legal representatives. For the sake of facility I shall refer to the deceased plaintiff as the plaintiff in this judgment. He and the defendant were the creditors of two brothers, Fidaali and Nuralli, who were the owners of the property in suit. They separated on September 29, 1927, when the property in suit was allotted to the share of Nuralli who undertook to pay off the joint debts, and also to pay Rs. 2,500 to Fidaali for his share. As Nuralli was unable to pay the amount in cash, he mortgaged the property in suit with possession to Fidaali for Rs. 2,500 on the same day. After they were thus separated, both the plaintiff and the defendant filed separate suits against them to recover their respective dues. The defendant filed suit No. 342 of 1928 on October 25, 1928, and pending the suit he got the property in suit attached before judgment, as if it belonged to both the brothers. In that suit the defendant got a decree for Rs. 800 on April 25, 1929, and the attachment before judgment was ordered to be continued. In the meantime, the plaintiff also had obtained a decree in his suit on January 20, 1929. The plaintiff presented darkhast No. 120 of 1929 on April 27, 1929, to execute his decree against Fidaali alone and to recover the decretal amount by the sale of Fidaali's interest as a mortgagee in the property in suit. Nuralli was not joined as a party to that darkhast. The defendant also filed darkhast No. 138 of 1929 against both Fidaali and Nuralli on June 13, 1929, to recover his decretal amount by the sale of the property which had been attached before judgment. When the defendant came to know that the plaintiff's darkhast was also pending, he made an application on August 12, 1929, that his darkhast should be kept along with the plaintiff's darkhast, and prayed for a rateable distribution of the amount realized by the sale of the property in the plaintiff's darkhast. Accordingly, an order was passed on September 10, 1929, stating that the defendant's darkhast for rateable distribution be kept along with the plaintiff's darkhast as prayed for. Thereafter, on September 28, 1929, the plaintiff privately purchased from Fidaali his mortgagee right in the property in suit for Rs. 1,999 by the sale-deed exhibit 94. That consideration was made up of Rs. 1,230 payable under the decree, and Rs. 769 paid in cash in the presence of the Sub-Registrar, After obtaining this sale-deed, the plaintiff dropped his darkhast and it was struck off on September 30, 1929. The defendant then amended the prayer in his darkhast on December 5, 1929, and asked for the attachment and sale of Fidaali's interest in the property in suit, Nuralli having become an insolvent in the meanwhile. Fidaali's share was then sold by auction and purchased by the defendant himself for Rs. 500 on October 9, 1930. The sale was confirmed on November 18, 1930, and the defendant applied for possession under Order XXI, Rule 95, of the Civil Procedure Code. The plaintiff objected, but his obstruction was removed on January 16, 1931, and the defendant was ordered to be given possession. The plaintiff then filed this suit under Order XXI, Rule 103, of the Civil Procedure Code, for a declaration that he was in possession of the property in his own right and was entitled to it, and for an injunction restraining the defendant from dispossessing him. The suit was filed on June 15, 1931, and on April 10, 1932, the defendant took possession of the property as the auction purchaser. The plaintiff, therefore, amended his plaint on June 6, 1932, and prayed for the possession of the property.

2. The defendant contended that as the property had already been attached in his suit No. 342 of 1928, the plaintiff's subsequent purchase was void against him under Section 64 of the Civil Procedure Code, and that his purchase was not bona fide but intended to defeat and delay the creditors of Fidaali and Nuralli, and was, therefore, voidable under Section 53 of the Transfer of Property Act. On the other hand it was contended on behalf of the plaintiff that the attachment before judgment in the defendant's suit No. 342 of 1928 did not affect Fidaali's mortgagee right in the property, and that the defendant's auction purchase was vitiated by the want of proper attachment. The trial Court held that the attachment before judgment was not proper and that the defendant, as the auction purchaser, had no right to challenge the validity of the plaintiff's purchase under Section 53 of the Transfer of Property Act. It also held that the plaintiff's purchase was not intended to defeat or delay the creditors of Fidaali and Nuralli. The plaintiff's claim was, therefore, decreed; but that decree was set aside in appeal by the learned First Class Subordinate Judge, A.P., who held that although1 the defendant was an auction-purchaser, he was also a decree-holder, and in that capacity he was entitled to challenge the plaintiff's purchase under Section 53 of the Transfer of Property Act, and that as the plaintiff had paid Rs. 769 to Fidaali for his benefit, the purchase was fraudulent and intended to defeat the creditors of Fidaali and Nuralli. On this ground it was held that the plaintiff had no title to the property in suit, and was not entitled to evict the defendant. All these contentions have been pressed in this Court by one side or the other.

3. This suit being filed under the provisions of Order XXI, Rule 103, of the Civil Procedure Code, the plaintiff must prove not only that he was in possession when he obstructed the defendant in taking possession of the property in suit as its auction-purchaser, but must also ' establish the right which he claims to the present possession of the property.' If he succeeds in doing so, his dispossession during the pendency of the suit does not matter. If his right is proved, then the order of the removal of the plaintiff's obstruction must be set aside and the status quo, as at the date of that order, must be restored, that is to say, the plaintiff must be put back into possession. The plaintiff does not claim to be the owner of the property in suit, but claims to be entitled to its present possession as the assignee of Fidaali's mortgagee rights. The assignment is attacked on two grounds; it is said to be void under Section 64 of the Civil Procedure Code, and to be voidable under Section 53 of the Transfer of Property Act. Section 64 of the Civil Procedure Code provides that where an attachment has been! made, any private transfer or delivery of the property attached or of any interest therein shall be void as against all claims enforceable under the attachment. It is alleged that the property in suit was attached before judgment in the defendant's suit No. 342 of 1928, and it was continued by the decree. It is urged on behalf of the plaintiff that the order of attachment was illegal, not being in accordance with the provisions of Order XXXVIII, Rules 5 and 6, of the Civil Procedure Code. According to those rules, the defendant should first be directed to furnish security, or to produce the property or its value, or appear and show cause why he should not furnish security. A conditional attachment may also be simultaneously ordered. If the defendant does not show cause, nor furnish security, then the attachment of the property is to be ordered. But in suit No. 342 of 1928, as soon as the defendant made an application for the attachment of the property before judgment (exhibit 61), a prohibitory notice was issued to Fidaali and Nuralli directing them not to transfer the property in any way during the pendency of the suit. They were not given the option of furnishing security. Nor was the order confirmed after a hearing. But I do not think that the plaintiff can take advantage of this irregularity. In spite of the prohibitory notice, Fidaali and Nuralli raised no objection and did not object to that notice. They did not offer to furnish security, and ultimately they allowed a decree to be passed against them whereby the attachment was continued. But in that suit Fidaali's mortgagee rights were not sought to be attached. In his application the defendant prayed for the attachment of the property itself as belonging to both Fidaali and Nuralli. But Nuralli had already become the sole owner of the property and had mortgaged it to Fidaali for Rs. 2,500. It is argued that thereby the property was divided into Nuralli's equity of redemption and Fidaali's mortgagee rights, and both of them must be deemed to have been attached by the attachment of the property itself. Even if it were so, the property itself was never actually attached. Under Order XXXVIII, Rule 7, the attachment before judgment must be effected in the same manner as the attachment in execution of a decree. Under 0. XXI, Rule 54, the attachment of immoveable property is to be made by an order prohibiting the defendant from transferring or charging the property in any way and all persons from taking any benefit from such transfer or charge. The order has to be proclaimed in the manner described in Sub-rule (2) of Rule 54. Nothing of the kind was done in suit No. 342 of 1928. Only one prohibitory notice was served on Fidaali and Nuralli (exhibit 62) and the rozanama (exhibit 67) shows that no proclamation was issued nor were all persons prohibited from taking any benefit from any transfer or charge thereafter. A mere order of attachment is not enough. In Muthiah Chetti v. Palaniappa Chett1 the Judicial Committee observed (p. 356) :

In view of these provisions the Board listened with some surprise to a protracted argument which culminated in the proposition that a property was in law attached whenever an order for attachment was made. The result, if this were so, would be that a person holding an order could dispense with attachment altogether, as an operation or a fact. Their Lordships need not repeat in another form these propositions. The order is one thing, the attachment is another. No property can be declared to be attached unless first the order for attachment has been issued, and secondly in execution of that order the other things prescribed by the rules in the 1 Code have been done.

4. Unless all the processes of attachment which are required by law to effect a valid attachment have been served, there is no such attachment of the property as would invalidate its transfer under Section 64 of the Civil Procedure Code. In Lala Hira Lal v. Munshi Jagatpati Sahai (1928) I.L.R. 8 Pat. 1 it was held that in the case of land paying revenue to Government, an attachment was not effective to invalidate a subsequent transfer as a copy of the order of attachment had not been affixed in the office of the Collector of the District. Hence in this case there was no effective attachment of the property, much less of Fidaali's mortgagee rights in it. In this view it is unnecessary to consider whether Fidaali's rights were moveable property to be attached under Order XXI, Rule 46, or immo veable property to be attached under Order XXI, Rule 54. They were not attached under either of those rules, and their assignment in favour of the plaintiff is not void under Section 64 of the Civil Procedure Code.

5. The next question is whether the assignment is voidable under Section 53 of the Transfer of Property Act at the option of the defendant. It is contended for the plaintiff that the defendant cannot get the benefit of that section since he is not a creditor of the assignor, but an auction-purchaser, and since he does not represent all the creditors. In support of the first contention reliance is placed on the ruling in Vasudeo Raghunath v. Janardhn Sadashiv.2 Section 53, Sub-section (1), provides

Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

Sub-section (2) of Section 53 provides-

Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

From the very wording of these sub-sections it follows that only a defeated or delayed creditor or a subsequent transferee has the option to impeach the transfer. An auction-purchaser, who is not the decree-holder himself, is not a creditor of the judgment-debtor, and it cannot be said that the transfer was intended to delay or defeat him, since he stepped in after the transfer by operation of law. Nor is he a subsequent transferee within the meaning of Sub-section (2). In Vasudeo Raghunath v. Janardhan Sadashiv, Shah J. observed (p. 512):

But the defendant is an auction-purchaser at a Court sale, and not a transferee by any act of the original owner. Having regard to the preamble as well as section 5 of the Act, it seems to be clear that a person, who steps in by operation of law and not by any act of the owner is not a subsequent transferee within the meaning of section 53. Ha is clearly not a person having an interest in the property within the meaning of the section, which apparently refers to interest, which exists in fact at the time of the transfer objected to.

This was the interpretation of the section as it stood before 1929, but the view expressed above is in no way affected by the amendment of the section by the Amending Act of 1929. But in this case the defendant was a creditor of Fidaali and was holding a decree against him when he assigned his mortgagee rights to the plaintiff. If that assignment was intended to defeat or delay the defendant, he can challenge its validity, although he subsequently became an auction-purchaser of the same property. He cannot challenge it as a 'subsequent transferee' under Sub-section (2) of Section 53, but can do so as a 'creditor' under Sub-section (2), which says, in effect, that whenever a creditor (or decree-holder) is delayed or defeated by the transfer of the property of his debtor (or judgment-debtor), the transfer is voidable at the option of such creditor (or decree-holder). If the defendant can prove that he was a creditor of Fidaali and that the assignment taken by the plaintiff from Fidaali was intended to delay or defeat him, then the assignment is voidable at his option, though he may subsequently become an auction-purchaser. A decree-holder does not lose his right to the benefit of Section 53 of the Transfer of Property Act by himself becoming an auction purchaser, and if the property purchased by him at the auction had been transferred by the judgment-debtor with intent to delay or defeat him, the transfer is voidable at his option.

6. It is true that if such a creditor institutes a suit to avoid such a transfer, he must do so 'on behalf of or for the benefit of all the creditors'. The reason of the rule is that the debtor should not be harassed by a multiplicity of suits by each and every creditor. But this does not mean that the creditor, even when he is defendant, must defend the suit on behalf of the whole body of creditors. He may plead Section 53 of the Transfer of Property Act as a personal defence to the suit against him, and it is not necessary that he must file a representative suit to avoid the transfer. It was so held by a full bench of the Madras High Court in Ramaswami Chettiar v. Mallappa Reddiar I.L.R. (1920) Mad. 760 before the section was amended by the amending Act of 1929. I do not think that the addition of paragraph 4 to Section 53, Sub-section (1), makes any difference, as it has no application to a creditor who has to defend a suit filed against him by a plaintiff claiming under a transfer voidable under Section 53. It is, therefore, open1 to the defendant to resist the plaintiff's claim on the ground that the assignment taken by him is voidable at his option.

7. If the plaintiff was a transferee in good faith and for consideration, the transfer is not voidable even though it has resulted in the delaying or defeating the other creditors of the transferor. At the date of the transfer the dar-khasts of both the plaintiff and the defendant were pending against Fidaali. Nuralli had become an insolvent. It was, however, open to Fidaali to convey his property to either of his creditors in preference to the other, although it was effected to avoid the execution of his decree by the latter. As observed by Sir Lawrence Jenkins in Mina Kumari Bibi v. Bijoy Singh Dudhuria I.L.R. (1916) Cal. 662A debtor, for all that is contained in Section 53 of the Transfer of Property Act, may pay his debts in any order he pleases, and prefer any creditor he chooses.' But in doing so he must not reserve any benefit for himself. The transfer of property to one creditor for a price far in excess of the debt due to him and the retention of the excess amount for his own benefit indicate an intent to defeat or delay the other creditors, especially when he has no other property left. The circumstances under which the plaintiff obtained the assignment from Fidaali are significant. The plaintiff filed his darkhast on April 27, 1929, and the defendant filed his darkhast on June 13, 1929. On August 12, 1929, the defendant made an application for the rateable distribution of the amount to be realized in the plaintiff's darkhast. That application was granted, and on September 10, 1929, the defendant's darkhast was kept pending the realization of assets by the sale of Fidaali's mortgagee rights in the plaintiffs darkhast. The plaintiff must have come to know this; and he quietly got Fidaali's mortgagee rights assigned to him privately for Rs. 1,999, out of which Rs. 1,230 went towards the satisfaction of his decree and Rs. 769 were paid in cash to Fidaali. Had these tactics not been resorted to, Rs. 1,999 would have been rateably divided between the plaintiff and the defendant. By this fraudulent transfer, Fidaali got Rs. 769 for his own benefit, and the plaintiff got his decree fully satisfied. The plaintiff cannot, therefore, be regarded as a transferee in good faith. Had the only purpose of the plaintiff been to recover his debt and the property purchased by him was not worth substantially more than the amount of the debt, then the transaction could not be treated as fraudulent though he knew that the defendant's claim would thereby be defeated. But here the plaintiff knowingly paid Rs. 769 to the judgment-debtor in cash, which otherwise would have been available for the defendant's claim. This was not a case of a mere preference of one creditor to another, but a mischievous device to benefit one creditor and the debtor at the expense of the other creditors. The assignment is, therefore, voidable at the option of the defendant, and he is not bound by it. The plaintiff's claim based on such an assignment must fail.

8. Lastly, it is urged that the assignment should be upheld at least to the extent of Rs. 1,230, the amount which was actually due to the plaintiff. Under the first paragraph of Section 53, Sub-section (1), the transfer is voidable in toto if its intent is to defeat or delay the transferor's creditors ; but the second paragraph, which is the same as the third paragraph of the section as it stood before the amendment in 1929, provides-

Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

As the plaintiff is held not to have taken the assignment in good faith, he cannot get the benefit of this paragraph. He relies upon the ruling in Rajani Kumar Dass v. Gaur Kishore Shaha I.L.R. (1908) Cal. 1051 but it does not mean to lay down that a transferee under a fraudulent document intended to defeat or delay creditors should have any lien for the amount actually due to him before the transfer. Scott C. J., after considering the effect of that case in Bhikhabhai Muljibhai v. Panachand I.L.R. (1919) 43 Bom. 707held (p. 713):

The inferences deducible from the established facts show that both' the transferor and the transferee had the intention of defeating or delaying the creditors of the transferor, and under those circumstances it appears to us that the document must at the option of the person defeated or delayed be treated as void in toto, and not merely as void in so far as there is no consideration.

Paragraphs 1 and 2 of Section 53, Sub-section (1), are not capable of any other interpretation. When the transferee is a party to the fraud, there can be no equity in his favour. It being held that the plaintiff is not a transferee in good faith, the transfer is wholly void since the defendant, the defeated creditor, has challenged its validity, and the plaintiff is not entitled to any relief in this suit.

9. In view of this finding, it is not necessary to consider whether the defendant has acquired a valid title to the property by his auction-purchase, or whether the auction-purchase is vitiated by the want of a valid and subsisting attachment of the property when the auction was held. It is argued that this is not strictly a suit in ejectment, but a suit under Order XXI, Rule 103, of the Civil Procedure Code, and if the defendant's auction-purchase be not legal and valid, he had no right to dispossess the plaintiff. The reply to this is that the plaintiff, as the assignee of Fidaali's mortgagee rights, had no locus standi to obstruct the auction-purchaser, since, the assignment is held to be void. The order of the executing Court removing his obstruction was, therefore, proper and cannot be set aside in this suit.

10. The appeal is, therefore, dismissed with costs.


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