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The Arvi Co-operative Credit Society, Limited Vs. Dhondiram Navalchand - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai
Decided On
Case NumberFirst Appeal No. 159 of 1938
Judge
Reported inAIR1940Bom289; (1940)42BOMLR486
AppellantThe Arvi Co-operative Credit Society, Limited
RespondentDhondiram Navalchand
DispositionAppeal dismissed
Excerpt:
indian registration act (xvi of 1908), section 49-decree on award--award not registered-decree though unregistered cannot he attacked by stranger-indian evidence act (i of 1872), section 44-decree-setting aside of decree-fraudulent transfer-transfer of property act (iv of 1882), section 53.;a decree, based on an award which though compulsorily registrable is not registered, cannot be attacked on the ground of want of registration, under section 49 of the indian registration act, 1908, in another suit by a person who is a stranger to the decree.;chimanlal v. dahyabhai (1938) 40 bom. l.r. 952 distinguished.;section 44 of the indian evidence act, 1872, does not permit a suit brought by an individual creditor and for his benefit alone to set aside a transaction contained in a decree on the..........the award whose contents could not be proved except by the award itself, and the admission of the award in evidence offended against the provisions of section 49 of the indian registration act which precludes the admission of a document which is compulsorily registrable under section 17 of the act. but the principle of finality of a decree will be undermined if a decree could be opened up for review by a stranger to it in an entirely different proceeding on the ground that the decree was founded upon evidence which was inadmissible. the observations in chimanlal v. dahyabhai were not intended to serve as an authority in support of such a view. assuming that the award was compulsorily registrable in the present case, on which i prefer not to express an opinion in view of the terms of the.....
Judgment:

Kania, J.

1. This is a first appeal from the decision of the First Class Subordinate Judge at Dhulia in Special Civil Suit No. 741 of 1935. The plaintiff (appellant), a co-operative credit society, filed this suit to obtain a declaration that the decree passed in Suit No. 349 of 1931 in the Dhulia Court in terms of the award is illegal, null and void and not binding on the plaintiff. The grounds are mentioned in paragraphs 2 to 5 of the plaint and in substance they are that defendants Nos 1 and 2 had some transactions in 1930. There was a private arbitration on March 30, 1931, and an award was made on the same date. On an application being made to the Court under the Civil Procedure Code a decree in terms of the award was passed on March 31, 1931. The ground for challenging the decree, as set out in this plaint, is that under that decree a charge was given in favour of defendant No. 1 on defendant No. 2's property, but that was to save the property of defendant No. 2 from his liability to the plaintiff society. There is a further prayer for a declaration that defendant No. 1 did not acquire any title to the property purchased by him in an auction sale held under special darkhast No. 1829 of 1934.

2. As it was suggested that the award and decree obtained by defendant No. 1 against defendant No. 2 in 1931 were a result of fraud and collusion and the charge was given with a view to defeat the plaintiff's claim, the learned advocate for the appellant took us through the evidence on record and pointed out different entries iri the books and the three promissorynotes which were referred to in the award. To establish the charge of fraud the cross-examination of the material witnesses is of a very flimsy character. It does not establish any fraud or collusion as suggested by the appellant. An attempt was made to point out to us some discrepancies in the entries and endorsements, but unfortunately for the appellant there was no cross-examination on those points. In law it is not open to the appellant to contend that there are discrepancies as no opportunity was given to the defendants to explain the apparent discrepancies. On that main ground this appeal must fail.

3. An interesting argument was advanced before us on the question whether the suit as filed is competent and whether the decree requires registration. As regards the second point it was contended that under the Indian Registration Act, Section 17(2)(f), an award stands on the same footing as a compromise, and if the decree is based on an award and comprises immovable property which is not the subject-matter of the suit, such a decree is not exempted from registration. It is not necessary to decide that point of law because a perusal of the reference paper signed by the parties in this case distinctly shows that the question whether a, charge should be given by defendant No. 2 in favour of defendant No. 1, in the event of any instalments being granted, was referred to the arbitrators. I am not, under these circumstances, prepared to consider that a charge on the immovable property was not within the subject-matter of the reference before the arbitrators.

4. It was also argued that an award which gives a charge requires registration, and a decree if it is founded on the award does not stand on a higher footing. In this connection reliance was placed on the decision in Chimanlal v. Dahyabhai : AIR1938Bom422 . It was there held that an award falls under Section 17(1)(b) of the Indian Registration Act, and when it purports or operates to create, declare, assign, limit or extinguish any right, title or interest of the value of one hundred rupees or upwards to or in immovable property, it is compulsorily registrable. In that case it was observed that it is not competent to a Court to file an award which is compulsorily registrable and has not been registered to make it a decree of the Court in contravention of the provisions of Section 49 of the Indian Registration Act, 1908. A decree of the High Court based on such an award can be set aside in review on the ground that there was an error apparent on the face of the record, the error being that the Court had been misled into making an order which was contrary to the statute. In the course of his judgment Mr. Justice Broomfield observed as follows (p. 955):-

It appears to me that the decree of the Court does enforce the award and give effect to it, and obviusly before the Court can take action according to the provisions of the second schedule, the award must be looked at as evidence and that itself is prohibited by Section 49 [of the Registration Act.] There seems to be no possible way of getting out of the difficulty. If the Court files an award which is compulsorily registrable and has not been registered and makes it a decree of Court, it is acting contrary to the provisions of Section 49 of the Indian Registration Act.

5. It may be noticed that the application in that case was by one of the parties themselves, and was by way of review. On those grounds the present case can be clearly distinguished. The observations in each individual case have to be read as applicable to the facts found there and I am unable to read those observations as having the meaning contended by the learned advocate for the appellant. I do not think that the Court in that case wanted to lay down a proposition to the effect that if any inadmissible evidence is admitted and a decree is passed, the same could be challenged in another suit by any party. I do not read that decision as supporting that contention at all. In the present case the suit is to set aside the decree and not the award. The question therefore would be whether the decree itself requires registration, and in this litigation we are not concerned with the question whether the award1 requires registration. In this case the contention: of the appellant is that the decree must be set aside if it is shown that inadmissible evidence was admitted. There is nothing to support this contention of the appellant. As I have pointed out I do not read the judgment in the abovementioned case as deciding that point at all, and in my opinion the contention of the appellant generally advanced in that way is unsound.

6. On the second question about the maintainability of the suit there appears no decision on the point. The suit is filed by the plaintiff in his own right. It is not a representative suit. Although it is stated at some place in the evidence that the plaintiff is the only creditor, that is no proof that there are no other creditors. The nature of the suit is to set aside a transfer of the property, as a result of the decree passed in favour of defendant No. 1, on the ground that the transfer was an attempt to defeat the claim, of the plaintiff against defendant No. 1. The question arises whether the principles embodied in Section 53 of the Transfer of Property Act cover the case. It appears from Bhagwant v. Kedari I.L.R. (1900) 25 Bom. 202that the principles contained in Section 53 of the Transfer of Property Act were recognised as applicable not only to Presidency towns but in the mofussil even before the Transfer of Property Act was made applicable to this Presidency. That decision further shows that a suit which a creditor can file to set aside a transaction between, his debtor and another creditor, on the ground that the said transaction was effected with a view to give the other a preference, must be a representative suit. It was urged on behalf of the appellant that in the present case the attempt is not to set aside the transaction but to set aside the decree, and relying on Section 44 of the Indian Evidence Act and the decision in Ahmedbhoy Hubibhoy v. Vulleebhoy Cassumbhoy I.L.R.(1882) 6 Bom. 703 it was urged that any party is entitled to file a suit. As I have stated there is no direct authority on the question before us and it is not necessary to decide it. As however the point was argued, we consider it right to point out that neither Section 44 of the Indian Evidence Act nor the decision in Ahmedbhoy Hubibhay v. Vulleebhoy Cassumbhoy refers to a transfer of property either as a part of the decree or in carrying out the decree. They refer only to setting aside of a decree. It appears therefore doubtful if those decisions have any bearing on the question of setting aside a transfer when the transaction is challenged on the grounds contained in Section 53 of the Transfer of Property Act. This is all the more so because in the normal course there is nothing in law to prevent a debtor from bona fide paying or securing an individual creditor. Such a transaction is not open to be challenged by any other creditor merely because the firstly mentioned creditor receives his payment before1 the other creditor begins to enforce his remedy. In law there are only two principles under which a transfer of property from a debtor to his creditor can be set aside. They are found in Section 53 of the Transfer of Property Act and in the Insolvency Act. In these circumstances it will require great consideration to uphold the contention of the appellants that because of Section 44 of the Indian Evidence Act a transaction contained in a decree can be set aside at the instance of an individual creditor and for his benefit alone. The appeal is dismissed with costs.

Wassoodew, J.

7. I agree. As I was a party to Chimanlal v. Dahyabhati : AIR1938Bom422 . I should like to clarify certain observations in that judgment which might be considered as authority for the view that all decrees based on awards which are compulsorily registrable are nullities if the awards are not registered. A decision of a Court, as observed by my learned brother, must be confined to the facts of the particular case. The question of the legality of the decree based on the award arose between the parties to it in an appeal from, that decree. It was not agitated between a stranger on the one hand and one of the parties to the decree on the other as it is in this case. It is true that the decree in that case purported to endorse the award whose contents could not be proved except by the award itself, and the admission of the award in evidence offended against the provisions of Section 49 of the Indian Registration Act which precludes the admission of a document which is compulsorily registrable under Section 17 of the Act. But the principle of finality of a decree will be undermined if a decree could be opened up for review by a stranger to it in an entirely different proceeding on the ground that the decree was founded upon evidence which was inadmissible. The observations in Chimanlal v. Dahyabhai were not intended to serve as an authority in support of such a view. Assuming that the award was compulsorily registrable in the present case, on which I prefer not to express an opinion in view of the terms of the award, it is sufficient to express my concurrence with the reasoning in the judgment just delivered that the decree cannot be set aside even on that ground in an independent suit by a stranger to it.


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