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Bommarayigowda and ors. Vs. Kalegowda and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 707 of 1947-48
Judge
Reported inAIR1951Kant103; AIR1951Mys103; ILR1951KAR407; (1952)30MysLJ89
ActsTransfer of Property Act, 1882 - Sections 53
AppellantBommarayigowda and ors.
RespondentKalegowda and ors.
Appellant AdvocateV. Krishnamurthy, Adv.
Respondent AdvocateMurle N. Lakshmi Naranappa and ;S.R. Ramanathan, Advs. for Resps. Nos. 2 and 4
DispositionAppeal allowed
Excerpt:
.....aside the punishment. further, the gravity of the charge cannot be ignored, unless the workman establishes that the delay has vitally prejudiced his case. just because there is delay, the punishment cannot be altered when the charge of fraud is proved. award was set aside. - (1) 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. nothing in this sub-section shall impair the rights of a transferee in good faith & for consideration. 1 as there is no money due to them & what was due under the decree has already been satisfied by sale of the properties. 1007. the observations are perfectly correct if the suit is one for the benefit of all the creditors;.....for the benefit of all the creditors.10. the lower cts. are wrong in thinking that section 53(1), t. p. act is applicable. the appeal is, therefore, allowed & the suit decreed as prayed for.
Judgment:

Yenkata Ramaiya, J.

1. The question for decision in this appeal is whether the dismissal of the suit filed by applts. on the ground that it is not a representative type is correct. The undisputed facts are that the properties described in the plaint schedule belonged to the joint family of defts. 1 to 4 of which deft. 1 is manager, that in a suit filed against deft. 1 for recovery of money due by his father to the heirs of one Kale Gowda there was a decree on 16-7-1937 for RS. 1420 against the assets of deceased Das'e Gowda in the hands of deft. 1 & the properties belonging to him: the ap. peal preferred by deft. 1 against the decree was eventually dismissed on 11-9-1940; Deft, l executed a settlement deed on 22-8-1940 giving away the properties to defts. 2 & 3: in execution of the decree against deft, l the properties were sold. Pltfs. 1 & 2 as vendees from the auction purchaser filed the suit from which this appeal arises for declaration of right, possession & mesne profits alleging that the settlement deed is a sham document executed with intent to defraud the decree-holders.

2. Both Cts. have held that the suit is not maintainable by virtue of Section 53(1), T. P. Act, as it has not been filed on behalf of all the creditors of deft, 1 & reld. upon 50 Mys. H.C. Reports 321 for dismissing it. On behalf of the pltfs. who have preferred this appeal, Sri Krishnamurthy contended that the view taken by the Cts. below is erroneous as the suit is not one filed by a creditor but is one filed by a purchaser who claims to be solely & absolutely entitled to the properties. Sri Lakshminaranappa on behalf of resps. contended that since the settlement deed is impugned as being fraudulent & sought to be avoided on that ground it is not permissible under the section for the pltfs. to claim the benefit of the reliefs in the suit to themselves exclusively & that this has been rightly disallowed.

3. Section 53, T. P. Act reads as follows:

(1) 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.

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

Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

A suit instituted by a creditor (which term includes a D. H. whether he has or has not applied for execution of his decree to avoid a transfer on the ground that it had been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of, or for the benefit of, all the creditors.

(2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee. For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.'

The section provides for suits the object of which is to get rid of fraudulent transfers & requires that a creditor who files such a suit must file it on behalf of all the creditors of the ostensible transferor, so that there may not be multiplicity of proceedings & advantage to any one creditor as against others. Unless the pltfs. can be said to be creditors of deft. 1 the objection to bring the suit in that form does not arise. Nor can it exist when according to the pltfs. there is, in fact, no transfer. The allegation in the plaint is that the settlement deed executed by deft, l is a sham & nominal document brought about with the object of defrauding the pltfs. of the decree amount. If the document is a sham, the purpose & effect of its execution are not material except for throwing light on its being real or unreal. The section implies the existence of a transfer & cannot apply to oases in which the transfer is characterised as a mere show without effecting any change of title or affecting the rights of parties. The difference between a transfer which is sham & which is fraudulent is pointed out in7 Mys. L. J. 418 by D. B. of this Ct. which held that Section 53 has no application if the transaction which is impeached is a sham & colourable transaction not intended to pass any title to the transferee. Bose J. expressed the same view in Vinayak v. Moreshwar, A. I. R. (31) 1944 Nag. 44 at p. 52 thus :

'The lower Appellate Ct. says .... that the transaction was bogus & liable to be set aside Under Section 53, T. P. Act. Now a bogus transaction is one which is not intended to have legal effect. It is a pretence & has no actual legal existence. Consequently, there is nothing to set aside. Only real transactions intended to have effect can be set aside. Section 53, T. P. Act, speaks of fraudulent transfers & so indicates that it is drafting with real transactions & not sham one ... Section 53 does not apply to sham transfers,'

Parbhu Nath v. Sarju Prasad : AIR1940All407 , was a case under Order 21, Rule 53 in which the pltfs. prayed for a declaration that the property which was professed to be sold by J. Ds. to another was liable to be attached & sold in execution of pltfs. decree. The objection that the suit was not filed on behalf of all the creditors as required by para 4 of Section 53, T. P. Act, was rejected on the ground that the provision does not apply to the case in which the sale-deed was alleged to be fictitious, without consideration, not intended to be acted upon. The cases of other H. Cs. in support of this view are cited in the judgment & it is not necessary to refer to them. The following passage in Mina kumari v. Bijoy Singh, 44 Cal. 662 at p. 670 is, however, instructive :

''First, then, as to the alienation in favour of the pltf. being, as it is termed in the resp's. case, collusive & fictitious. It is there alleged that 'the J. D. was, & always remained, the real owner of the properties in dispute.' Strictly this means that the transaction was banami & not that it was a fraudulent transfer within the meaning of Section 53, T. P. Act. The difference is distinct, though It is often slurred.'

As the case of pltfs. is that the settlement is nominal, the properties continue to be in possession of the settlor & that pltfs. are owners entitled to possession, the question is whether Ex. II is what it looks to be or whether it is fictitious, not evidencing a genuine transaction. A case of this kind is not affected by the requirement of Section 53 that it should be filed on behalf of all creditors.

4. Another reason to hold that the case is not subject to this requirement is that it applies to a suit by a creditor & that the pltfs. cannot be now termed creditors of deft. 1 as there is no money due to them & what was due under the decree has already been satisfied by sale of the properties. The pltfs. do not want to make the properties available for being proceeded against to realise debts payable by deft. 1 & do not admit that any one except themselves has any right in these. They claim possession of the properties in their own right. If the suit is to be representative, it is difficult to see how possession of the properties can be sought for at all & rights of ownership be advanced by any one. The suit is to enforce the frights acquired by virtue of the Ct. sale & there is nothing in the section to justify the purchaser or his transferee being called upon to give up his rights in favour of others, Sri Lakshminaranappa has not also explained how the creditors of deft. 1 would be affected by the result in this suit as the properties will not become available for recovery of their dues even if the transfer by deft. 1 is declared ineffective & there remains the Ct. sale to be got rid of. A suit Under Section 53 cannot be availed of to resolve disputes amongst the several creditors. Sri Thakurji v. Narsingh Narainsingh, A.I.R. (8) 1921 Pat. 53, cited on behalf of the applts. supports the contention that the suit is not defective. It was held that a purchaser in execution of a decree need not sue for declaration that a conveyance by J.-D. was fraudulent & possession of property on behalf of the several body of creditors. This case has been folld. in Radhika Mohan v. Hari Bashi : AIR1933Cal812 . The facts in that case were that the pltf. after purchasing the properties in execution of a decree for money & obtaining symbolical delivery sued the wife of the J.-D, for declaration of his right & possession alleging that the gift of the properties by J. D. in favour of his wife was a fraudulent & benami transaction. The objection to the suit that in so far as it challenged the gift as fraudulent was really a suit Under Section 53, T. P. Act & as such should have been brought by or on behalf of all the| creditors was negatived thus:

'Reliance is placed on the observations of Mookerjee J. in Karim Lal v. Mooshabar, 34 Cal. 999 at p. 1007. The observations are perfectly correct if the suit is one for the benefit of all the creditors; but if it is not meant to be for that & though the claim in it proceeds an the principle enunciated in Section 53, T. P. Act, it is not a suit within that section. I entirely agree with the observations of Das J. in A. I. R. (8) 1921 Pat. 53.'

5. The lower Cts. have proceeded on the impression that the rule laid down by the F. B. in 50 Mys. H. C. R. 321 applies to this case & therefore felt it unnecessary to examine with reference to the terms of Section 53 question of the maintainability of the suit. Apart from the features which distinguish the present case from that considered by the F. B. the statement of the learned Chief Justice

'In the case of a transaction which is benami the property really is in the J.-D. & Section 53 would not apply to the ease at all'

helps the applts. as that is what in effect as already pointed out, their case is. The finding of the learned Subordinate Judge is that the settlement deed is only a make-believe, that there was no need for it, that deft. 1 continued to be in possession of the properties after it. The transaction was, therefore, unreal & not intended to be acted upon or convey title. The other statement in the decision 'that if the transfer is impeached on the ground of fraud the suit should be filed on behalf of all the creditors' cannot apply to this case as the pltf. is not a creditor to whom anything is due or alleged to be due. The suit under consideration of the F. B. was one under Order 21, Rule 63 to set aside an order allowing a claim petn. so as to enable the D.-H. to proceed against certain immovable property in execution for realisation of the decree debt. The present suit is for possession on the basis of a perfected right. The view expressed in the F. B. decision is not applicable to this case.

6. The only question material for the disposal of the suit is whether the settlement deed was a sham document & on this the finding of the learned Subordinate Judge that it is so is in our opinion correct. The deed has come into existence when there was a decree against the executant & without making any provision for payment it purports to deprive the J.-D. of rights in all the properties; presented for registration by the executant himself. There was no demand or bona fide need for the arrangement just at that time & the properties in spite of the settlement remain in possession of deft, l as before. The so-called settlement was, therefore, a make-believe & not intended to convey title to defts. 2 & 3 who are close relations of deft. 1 in the properties.

7. As a result of the finding that the suit is maintainable and that the settlement deed executed by deft. 1 is a sham document it follows that the applts. are entitled to succeed. The appeal is allowed & in reversal of the decrees of the lower Gts. the suit is decreed as prayed for with costs throughout.

Mallappa, J.

8. I agree. The evidence in the case justified the conclusion that the settlement deed purporting to convey all the properties in favour of the nearest relations & making no provision for the discharge of the decree debt was not intended to transfer any interest in the immoveable property. The provision of law which according to the lower Cts. required the pltf. in such cases to file a suit in a representative capacity is Section 53(1) of the Act which deals with the transfer of property. The provision in that section is applicable only if there is a transfer & that transfer is sought to be avoided. It is not the pltf's case that there is a transfer & he has not filed the suit to avoid any transfer. As the pltfs. case is that the settlement deed evidences a sham transaction & that it does not transfer any property, Section 53(1), T. P. Act is not applicable.

9. Moreover the pltf. claims possession under a transfer which according to him is valid. His filing a suit in a representative capacity would mean that the transfer in his favour has to be avoided in favour of other creditors, if any, though it is nobody's case that the sale in pltf.'s favour is fraudulent & has to be avoided. Even if the settlement deed amounts to a transfer without consideration, & the suit is one to avoid such a sale, it falls Under Section 53(2), T. P. Act, which does not require that the suit should be instituted on behalf of or for the benefit of all the creditors.

10. The lower Cts. are wrong in thinking that Section 53(1), T. P. Act is applicable. The appeal is, therefore, allowed & the suit decreed as prayed for.


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