(1) This second appeal is against the decree and judgment of the learned Subordinate Judge of Amalapuram, in A. S. No. 51 of 1955 which reversed the decree and judgement of the District Munsif, Razole, in O. S. No. 101 of 1953.
As the lower appellate court disposed of the appeal merely on the question of law which was taken as a preliminary point, I called for a finding in regard to issue No. 1. The learned Subordinate Judge submitted his finding that the transaction was entered into fraudulently with a view to defeat and delay the creditors of defendants 2 to 6 and that on the date of Ex. B-1, there were several creditors, viz., the plaintiff, defendants 7 and 8, P. Ws. 2 and 4, who were pressing the defendants 2 to 6 for payment. The result is while the plaintiff succeeded in getting concurrent findings in his favour on issue No. 1, he failed to obtain a decree as it is considered by the lower appellate court that this suit by a creditor to declare a mortgage in favour of another creditor as not binding is not one maintainable either under Section 53 of the Transfer of Property Act or under Section 42 of the Specific relief Act.
(3) A few short facts need be noticed as they become necessary to appreciate the question of law that falls for consideration. Defendants 2 to 6 constituted a joint Hindu family and owned properties which is the subject matter of mortgage, Ex. B-1. The plaintiff obtained a decree against defendants 2 and 3 in S.C. 554/52 on the file of the District Munsif's Court, Razole on the foot of a promissory note dated 19-5-52 executed by the 2nd defendant in favour of the plaintiff and on two hand loans. When the plaintiff was about to take out execution of the decree of the Small Causes Court in his favour, defendants 2 to 6 executed the impugned mortgage Ex. B-1 on 24-2-1953 in favour of the 1st defendant for a sum of Rs. 1,500/-.
It is urged that the 1st defendant is a close friend of defendants 2 and 3. Defendants 7 and 8 are other creditors of the joint family of the defendants 2 to 6, who obtained a decree in S. C. No. 547 of 1952 on the file of the District Munsif's Court, Razole. They have been bringing the properties for sale subject to the mortgage Ex. B-1 in execution of their decree. There are also other creditors, who are P. Ws. 2 and 4. At this stage, the plaintiff filed a suit out of which this second appeal arises for a declaration that the mortgage deed, Ex. B-1 dated 24-3-1953 is not true and valid and not supported by consideration with a view to defeat the claims of the creditors of defendants 2 to 6 and that it does not bind the plaintiffs and other creditors.
(4) In the trail Court, the question of maintainability of the suit by the plaintiff who though a creditor has only a decree in his favour, had been mooted by the learned District Munsif. Apart from noting the contentions of the parties and observing that 'a reading of the whole plaint and the approach to the case by the plaintiff appears to be one that falls within the scope of Section 53 of the Transfer of Property Act', he had not gone into the question fully. The learned Subordinate Judge took up the only question regarding the maintainability of the suits and construing the plaint as containing the allegations that the mortgage transaction was brought in to existence to screen the properties of defendants 2 to 6 and that it is also a sham transaction which is not supported by any consideration, held the view that what the plaintiff seeks to attack is not a real transaction which is fraudulent in nature, but a transaction which is sham and nominal in character and under which no title or interest was intended to be conveyed to the mortgagee 1st defendant and found, following the decision in Krishnaveni Ammal v. Soundararajan, AIR 1945 Mad 53, that the suit is not maintainable.
(5) Mr. V. Parathasarathi, learned counsel for the appellant argued firstly that, having regard to the findings of the lower courts that the transaction is fraudulent, having been brought about to defeat and delay the claims osfs the creditors of defendants 2 to 6, the suit as framed is maintainable under Sec. 53 of the Transter of Property Act, secondly that even the conclusion reached by the lower courts that the mortgage bond is not supported by consideration would not preclude in any case the determination of the question raised by the plaintiff as to the character of Exhibit B-1 under section 42 of the Specific Relief Act and lastly that, as the plaintiff is only seeking to have a declaration of his right to attach the property which a creditor is entitled to, the suit is maintainable both under sections 39 and 42 of the Specific Relief Act. ?
(5A) As regards the first question, an examination of the decided cases establishes that a suit by a creditor to defeat and delay the claim of the creditors of the transferors cannot lie under Section 53 of the Transfer of Property Act when the transaction is a sham nominal one. The reason for such a conclusion that is apparent on a reading of these decisions is that when a transaction is not supported by any consideration whatsoever, the transaction cannot in any sense be real, but transaction does not need to be set aside. No question of avoidance of such transaction would arise as eventually the transferor in such a transferor in such a transaction is not avoiding anything which transferred the property or created any interest in it because the transferee in only an alias for himself.
This view finds support in the distinction drawn by Sri Lawrence Jenkins in Mina Kumari Bibi v. Bijoy Singh Dudhurai, ILR 44 Cal 662: (AIR 1916 PC 238) between the incidences pertaining to a benami and a fraudulent transfer. There is pointed out that the difference between a collusive and fictitious transaction, which is benami and a fraudulent transfer with in the meaning of Sec. 53 of the Transfer of Property Act, is distinct though it is often slurred. The decision in AIR 1945 Mad 53 is also in point as it deals with a case of a transaction which is alleged to be fraudulent, but at the same time not supported by any consideration. There a sale was sought to be avoided. Certain alienations made in favour of the transferor's wife and daughter were alleged to be benami in nature though for defrauding the 1st defendant's creditors. The appellants before the High Court were the transferees. The plaintiff therefore alleged not that there was actual transfer to the defendants but that there was only a transfer in form, the actual property remining with the transferor. The court found that it was so. It was in those circumstances conceded that the provisions of Sec. 53 of the Transfer of Property Act will not apply.
The decision is sheo Gobind Koeri v. Ram Asray Singh, Air 1939 Patna 5, also bears on this point. There the plaintiff alleged that a Rehan bond is a mere colourable transaction executed by the 1st defendant in favour of the 2nd defendant passing neither title nor possession but designed merely to defeat the claim of the plaintiff. In that Second Appeal, the question whether such a suits is maintainable was raised and also whether if the transaction cannot be avoided under Section 53 of the Transfer of Property Act, a suits otherwise also will not at all lie. That Court proceeded to decide the latter point only as there was room to assume that such a suit will not lie under Section 53 of the Transfer of Property Act. A Full Bench of the Nagpur High Court in Vinayak Shamrao v. Moreshwar Ganesh, AIR 1944 Nag 44, (FB) were considering the powers of a creditor to annul bogus transfers under Sec. 53 of the Transfer of Property Act. At page 52 it was observed:
'Now a bogus transactions one which is not intended to have legal effect. It is a pretence and 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 and so indicates that it is dealing with real transactions and not sham ones'.
A Division Bench of the Allahabad High Court also held a similar view in Parbhu Nath Prasad v. Sarju Prasad, AIR 1940 All 407. There properties in the name of the 1st defendant were attached as though belonging to the 2nd defendant. But the objection of the 1st defendant was allowed. The plaintiff instituted the suit to declare that the sale by the 2nd defendant in favour of the 1st defendant was fictitious and without consideration and entered into with a view to evade payment of the amount due to the plaintiff. The question whether that was a suit under section 53 of the Transfer of Property Act was considered and Collister, J. speaking for the Division Bench stated:-
'In the plaint in the present suit it was clearly pleaded that the sale deed in question was fictitious and without consideration, that it was never acted upon and the parties to it had no intention that it should be acted upon. In other words, what the allegations in the plaint amount to are that the deed of sale was a sham and bogus transaction and that the property which purported to be conveyed under the instrument of sale was never conveyed at all and remained the property of the vendor, who is the judgment debtor of the plaintiff-respondent states before us that this is his case; he says that since there was in fact no transfer, there is nothing which can be avoided and therefore there was no necessity to institute a suit under S. 53, TAP. Act'.
Lower down the Division Bench held that:
'Having regard to the authorities of this and other Courts, which I have discussed above, I am of opinion that this view must prevail..........' In doing so, they relied upon the decision of in Swaminatha Ayyar v. Rukmani Ammal, AIR 1920 Mad 88(1). The Madras High Court referred in this decision to the relevant authorities having a bearing on the question which bring about the distinction between a real transfer which intended to defeat the creditors and a sham transaction. The observations made by Spencer, J., in that judgement require to be reiterated. It is as follows:-
'I cannot agree with the appellant's argument based on Abdulla Haji v. Ibrayan Kutty, 50 Ind Cas 959: (AIR 1919 Mad 87) that an instrument which is executed with the motive of defeating creditors musts necessarily be one intended to have some effect and therefore falls within the scope of S. 53, T. P. Act.
Whether a transfer is a real or nominal one depends on whether the parties entering into the transaction have at the time an animus transferendi. If they have no such animus, then their act does not fall within the definition in S. 53, T. P. Act. and is not a transfer of property at all.
Their object may not merely be to amuse themselves. At the same time they may have no real intention that property should pass, and in such a case the document will represent a sham or nominal transaction and it will be unnecessary that a suit under S. 53, T. P. Act should be brought to have it avoided.'
Therefore having regard to the principle that a nominal and sham document need not be avoided even if it is in fraud of creditors I am unable to accede to the contention of the learned Advocate for petitioner that Sec. 53 of the Act applies. Therefore I hold that such a suit is unsustainable under Section 53 of the Transfer of Property Act.
(6) It is next contended that whatever may be said in regard to a sake deed which is nominal or sham, the position with regard to a transaction by way of a mortgagee should be viewed differently inasmuch as, except in the case where possession is parted with in all other cases the possession will remain only with the mortgagor and it is therefore immaterial whether the mortgage is for consideration or only brought about collusively. In other words, what is contended for is that this distinction which obtains between sham and nominal sale deeds and those with consideration and in fraud of creditors could not be made applicable to the cases of mortgages and that therefore the transaction by way of mortgage whether supported by consideration or not could be avoided under Section 53. The learned Counsel would therefore urge that the present suit to set aside the mortgage deed executed by defendants 2 to 6 in favour of defendant No. 1 would lie.
This contention if accepted would certainly lead to an invidious distinction between a transfer by way of sale which, in my view, is not contemplated by the language of Section 53. That Section covers every transfer of immovable property with intent to defeat or delay the creditors and obviously ignores anay distinction between transfers by way of mortgage and a sale. Further it is not as though there are no cases covering this aspect. Mr. A. Gangadhara Rao for the respondents rightly relied on them. Justice Wadsworth in Narasimhamurthi v. Maharajah of Pittapur, 1941-2 Mad LJ 99 : (AIR 1941 Mad 690) did not countenance any distinction between a mortgage and a sale for purposes of Section 53 of the Transfer of Property Act in the matter of the exctent to which it could be set aside, whether it is partly supported by consideration or not. The learned Judge was considering a case where a mortgage was partly supported by consideration and has ruled as follows:
'It must, I think, be taken as established so far as Madras is concerned that when a debtor with a view to defeat or delay his creditors colludes with on of these creditors and creates a mortgage in his favour for a consideration which is partly fictitious and partly made up of a true money debt due to that creditor, on the finding that the transaction as a whole was a collusive transaction as a whole was a creditors, the transactions should be set aside as a whole and the creditor who is a party to the fraud should not be allowed the protection of the transaction to the extent of his prior debt discharged thereby'.
It is useful here to refer to the ratio of the decision in AIR 1939 Pat 5 which concerns with the case of a mortgage deed which is attacked as a sham transaction and under which no consideration passed. There, though no doubt the Division Bench of the Patna High Court were holding that a suit for possession by a plaintiff will lie where the plaintiff alleges a mortgage deed executed by the debtor without consideration, it has no doubts about the non-maintainability of a suit under Sec. in respect of that transfer, which has been alleged and found to be seam transaction without consideration. Therefore, this line of reasoning, namely, that the case of mortgage deeds is on a different footing from that of a sale deed and could be avoided under section 53 of the Transfer of Property Act irrespective of the fact that the mortgage deed was supported by consideration in part or not at all would not, in my view, avail the appellant.
(7) The next argument which has to be considered is whether even though the mortgage is said to be nominal and collusive and could not be avoided under Section 53 of the Transfer of Property Act, is not the plaintiff-creditor entitled to ask for a declaration that the transaction is a nominal transaction, namely, the mortgage or sale transaction is a transaction without consideration and that the transferee being only a benamidar or a nominal person, the property continues to be the property of the mortgagor or alienor. It is undisputed that though it is not necessary to avoid a nominal transaction it is still possible for suits to be laid for declaration by the transferor that the transferee or the alliance is not the real owner. Such suits come within the purview of Section 42 of the Specific Relief Act.
The principle which governs the filing of such suits is that as no transfer of property is sought to be effected by means of a collusive or sham transaction the declaration that the ostensible purchaser or mortgagee is only a benamidar can always be had at the instance of the executant of a document. Section 42 of the Specific Relief Act enables a suit to be filed by any person entitled to a legal character or to a right as to property against persons denying or interested to dent his title to such character or right; and the class of persons which can claim this relief has also been extended to the cases coming under the following dictum of the Privy Council as laid own in Sheoparasan Singh v. Ramanandan Prasad Singh, ILR 43 Cal 694: (AIR 1916 PC 78). Adverting to Section 42 of the Specific Relief Act as not being exhaustive of the declaratory suits, Sir Lawrence Jenkins has made the following observations:-
'A plaintiff coming under this section, must, therefore, be entitled to a legal character or to a right as to property...................'
In AIR 1945 Mad 53 the specific question which of the creditors can institute a suit under Section 42 of the Specific Relief Act has been answered with reference to the creditor who has attached the properties and differentiating that case from that of a creditor who has only a right to attach in execution of his decree but has not attached the property. Mocket Offg. C. J. discussed the law concerning this, and following K> R. M. A. Firm v. Maung Po Thein, ILR 4 Rang 22: (AIR 1926 Rang 124) which was also approved by the Full Bench of the Rangoon High Court in Maung Ba Baung v. Maung Ba Yin, AIR 1939 Rang 332, concluded that though the general view is that Section 42, Specific Relief Act, is not exhaustive, there is no authority for the proposition that a suit for a declaratory decree Will lie when the plaintiff is neither entitled to any legal character nor to any right in the suit property. As illustrative of the latter category the case of a decree-holder who has only a right to proceed in execution and who has not attached the property of the debtor is mentioned. The learned Officiating Chief Justice has also put the ratio of the decision the reported case on the basis of the warning of their Lordships of the Privy Council contained in ILR 43 Cal 694: (AIR 1916 PC 78) which said:
'There is so much more danger in India than here of harassing and vexatious litigation that the Courts in India ought to be most careful that mere declaratory suits be not converted into a new and mischievous source of litigation'. There is no gain saying that if the present suit is allowed to be maintained, it will only be a forum for such a mischief, which is necessary to be avoided. Thus, on principle and authority, I am of the view that this contention is untenable. A suit to declare that the creditor has a right to attach a property is unnecessary and unknown. It follows that a creditor if he obtains a decree against his debtor who has created a collusive or nominal transaction, could not lay a suit even under Section 42 of the Specific Relief Act for mere declaration that the transaction is not binding on him. He should attach the property in execution of his decree and threrafter lay a suit if any claim is allowed. But any attempt to circumvent this procedure by resorting to Section 53 of the Transfer of Property Act or Section 42 of the Specific Relief Act is a course which is neither authorized by law nor has justification therefor otherwise. Also the remedy provided under Sec.53 for the reasons given above will not be available to a person other than the executant of the document.
(8) In This view I uphold the decision of the lower court in regard to the legal issue and find that the suit is not maintainable. This Second appeal is, therefore, dismissed with costs. No leave.
(9) Appeal dismissed -- leave refused.