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Parbhu Nath Prasad Vs. Sarju Prasad and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty ;Civil
CourtAllahabad
Decided On
Reported inAIR1940All407
AppellantParbhu Nath Prasad
RespondentSarju Prasad and ors.
Excerpt:
.....to avoid liability. 9. 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. on the other hand, if learned counsel for the plaintiffs-respondent is unable to satisfy the court that the deed of sale was inoperative, it is obvious that the suit must fail. the defendant parbhu nath is not a transferee in good faith and for consideration. 10,000 and defendant 2 apparently owns some other property as well. ) for the reasons which i have given i am of opinion that the plaintiffs have failed to establish that the sale deed in suit was without consideration or that it was not given effect to. since the onus lay..........with each other and with a view to evade payment of the amount due to the plaintiffs. the sale deed, they contended, was never enforced, and the parties had no intention of enforcing it and therefore it was null and void and ineffectual as against the plaintiffs. they accordingly prayed for a declaration that the property in question is liable to be attached and sold in execution of their decree.3. the suit was contested by defendant 1 alone. he alleged that a decree for a considerable sum of money had been passed against defendant 2 at daltonganj in behar and that decree had been transferred to the court of the civil judge of ballia for execution. in order to satisfy that decree, defendant 2 borrowed a sum of rs. 800 from the contesting defendant under a sarkhat dated 3rd april.....
Judgment:

Collister, J.

1. This is a defendant's appeal arising out of a suit for a declaration that certain property is liable to attachment and sale in execution of a decree for the plaintiffs. The allegations in the plaint were as follows:

2. Defendant 2-a man named Sant Prasad-used to purchase cloth from the plaintiffs' firm, and on 1st June 1930 he executed a sarkhat for Rs. 8550 being the amount due from him at that date to the plaintiffs. Thereafter all business ceased between the plaintiffs and defendant 2. Subsequently, the plaintiffs instituted Suit No. 21 of 1933 and obtained a decree for Rs. 7761 against defendant 2 on 23rd May 1934. When they put their decree into execution and attached certain property as belonging to their judgment.debtor, defendant 1, namely Parbhu Nath Prasad, objected under Order 21, Rule 58, Civil P.C., alleging that he had purchased this property from defendant 2 on 4th October 1932 and it was not liable to sale. That objection was allowed and accordingly the plaintiffs instituted the suit out of which this appeal arises. They went on to allege in their plaint that defendant 1 is closely related to defendant 2, that he was not in a financial position to purchase this property, that defendant 2 was still in possession and that the deed of sale was fictitious and without consideration and was entered into by the parties thereto in collusion with each other and with a view to evade payment of the amount due to the plaintiffs. The sale deed, they contended, was never enforced, and the parties had no intention of enforcing it and therefore it was null and void and ineffectual as against the plaintiffs. They accordingly prayed for a declaration that the property in question is liable to be attached and sold in execution of their decree.

3. The suit was contested by defendant 1 alone. He alleged that a decree for a considerable sum of money had been passed against defendant 2 at Daltonganj in Behar and that decree had been transferred to the Court of the Civil Judge of Ballia for execution. In order to satisfy that decree, defendant 2 borrowed a sum of Rs. 800 from the contesting defendant under a sarkhat dated 3rd April 1932 and subsequently borrowed a further sum of Rs. 2500 under another sarkhat on 3rd July 1932, and with this money the decree against him was satisfied, a portion of the claim being remitted by the decree-holder. Subsequently defendant 2 incurred the need of a further sum of money, and accordingly the contesting defendant advanced him a sum of Rs. 577 and the latter executed a sale deed in favour of the contesting defendant, the consideration therefor being this sum of Rs. 577 and the two sums of Rs. 800 and Rs. 2500 previously advanced, plus interest: total Rs. 4000. Thereafter the contesting defendant obtained mutation in his name, having been put in possession of the property which was sold to him. Finally the contesting defendant denies all relationship between himself and defendant 2, and he states that defendant 2 still has four houses from which the decree of the plaintiffs can be satisfied.

4. The learned Civil Judge has decreed the suit of the plaintiffs, and hence this appeal. It will have been observed that this suit was not framed as a suit under Section 53, T.P. Act; that is to say, it was not instituted on behalf of, or for the benefit of all the creditors as required by para. 4 of that Section where a suit is brought to avoid a transfer which is alleged to have been made with intent to defeat or delay the creditors of the transferor. At the time of arguments in the Court below a plea was taken to the effect that the suit was not maintainable for the reason that it had not been instituted by or on behalf of all the creditors of the transferor; but the learned Judge overruled that plea on the ground that it ought to have been taken in the written statement. This same plea has now been advanced before us and we have heard considerable argument in respect of it. Learned counsel for the plaintiffs-respondent however pleads that this was not a suit under Section 53, T.P. Act, at all; he says that the sale deed in favour of defendant, appellant was a bogus transaction and so there was no transfer such as is contemplated by Section 53 of the aforesaid Act. The vendor retained title in himself, and in such circumstances Section 53 has no application. There is considerable authority for this view.

5. First of all there is a decision of their Lordships of the Privy Council, Petherpermal Chatty v. Muniandi Servai (1908) 35 Cal 551. The question before their Lordships was one of limitation and had no concern with Section 53, T.P. Act, but we can nevertheless derive assistance from their decision. In that case the plaintiff's predecessor had collusively executed a benami deed of sale in respect of certain property in favour of the defendant's predecessor in order to defeat the claim of a prior equitable mortgagee. The latter sued the parties to the aforesaid benami deed and obtained satisfaction of' his claim and thereafter the plaintiff instituted a suit to recover possession of the property from the defendants. It was held by their Lordships that since the deed of sale was benami, it was inoperative and did not require to be set aside and therefore Article 144 and not Article 91, Limitation Act, was applicable. Then there is another decision of the Judicial Committee, namely Mina Kumari Bibi v. Bijoy Singh Dudhuria (1916) 3 AIR PC 238. There, as in the case with which we are now dealing, there was an objection in the execution proceedings on the part of a transferee from the judgment-debtor. At page 670 their Lordships say:

First, then as to the alienation in favour of the plaintiff being as it is termed in the respondent's case, collusive and fictitious, It is there alleged that 'the judgment-debtor, Babu Chhatrapat Singh, was and always remained the real owner of the properties in dispute.' Strictly this means that the transaction was benami and 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. To the suggestion that the transaction was benami a complete answer is furnished by the admission that the judgment-debtor owed the plaintiff the amount stated to be the consideration for the sale deeds and more.

6. In Swaminatha Aiyar v. Rukmani Ammal (1920) 7 AIR Mad 88, it was held by the Madras High Court that an instrument which is executed with the intention of defeating creditors, but which passes no title, is not affected by the provisions of Section 53, T.P. Act; the transaction evidenced by the document is merely nominal and can be avoided without a suit under Section 53, T.P. Act, to have it avoided. Spencer J. at p. 767 says:

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 Section 5, T.P. Act, and is not a transfer of property at all.

7. A similar view was taken by the Patna High Court in Bhagwan Lal v. Rajendra Prasad (1923) 10 AIR Pat 564 where the learned Judges say:

Section 53, T.P. Act, seems to contemplate a transfer of property binding as between the parties to it, but one which is voidable in the circumstances there contemplated. If however the transaction is merely colourable and not meant to be acted upon between the parties, there is clearly no transfer at all and in a case like the present it would be merely a fraudulent attempt on the part of the respondents to avoid liability.

8. The next authority is from our own Court. It is the case in Mt. Saraswati Kuar v. Mahabir Prasad : AIR1928All476 we find the following observation:

If a deed is farzi and fictitious, it is merely waste paper and no title passes to the ostensible transferee. The property continues to vest in the donor and is obviously liable to attachment and seizure by his creditor.

9. 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 plaintiffs'. Learned counsel for the plaintiffs-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 Section 53, T.P. Act. He pleads that, if he can establish his allegation that the instrument of sale was a sham, bogus and inoperative transaction, he is entitled to a declaration that the property which purports to have been conveyed thereunder is liable to sale in execution of his decree. Having regard to the authorities of this and other Courts, which I have discussed above, I am of opinion that this view must prevail, and I cannot therefore accept the plea which has been advanced on behalf of the defendant-appellant that the suit was not maintainable for the reason that it was not instituted by or on behalf of all the creditors of the judgment-debtor, as required by para. 4 of Section 53, T.P. Act. On the other hand, if learned Counsel for the plaintiffs-respondent is unable to satisfy the Court that the deed of sale was inoperative, it is obvious that the suit must fail. In Mt. Saraswati Kuar v. Mahabir Prasad : AIR1928All476 , already referred to, it was held that in a suit under Order 21, Rule 63, Civil P.C., when the plaintiff impugns a document duly executed and registered and under which mutation has been effected, as a sham, the burden lies heavily on him to prove that it is so. In the present case the learned Judge sums up his findings in the following words:

We find that the sale deed has been executed for a very inadequate consideration, that Parbhu Nath is a son-in-law of a friend and neighbour of Sant Prasad, that Sant Prasad has been in possession of the vended property in some form or the other, that Parbhu Nath resided far off from the property sold, that all the attesting witnesses and the scribe are Sant Prasad's men, that Parbhu Nath was not even present when the sale deed was executed, that Sant Prasad was indebted to the plaintiffs at the time of the sale deed, that Sant Prasad has not enough property left to pay off the debt due to the plaintiffs, that the payment of consideration by Parbhu Nath is very doubtful and that Parbhu Nath could have given much stronger evidence if the transaction was genuine.

10. Finally the learned Judge says:

The result is that the sale deed in suit must be held to be fictitious and executed to defeat and delay the plaintiffs and was only a colourable transaction. The defendant Parbhu Nath is not a transferee in good faith and for consideration.

11. The property purports to have been sold for Rs. 4000, and the learned Judge finds that its actual value is approximately Rs. 10,000; but assuming that this finding is correct-as I think it probably is-it will not assist the plaintiffs in this suit if it appears that there was in fact a transfer, however inadequate the consideration may have been and however fraudulent the transaction. The learned Judge does not actually find that no consideration passed; all he says is that 'the payment by Parbhu Nath is very doubtful.' He emphasizes the improbability of defendant 1 having advanced the sums of Rs. 800 and Rs. 2500 on a sarkhat to a person with whom he disclaims all relationship and against whom a decree for over Rs. 5000 was pending. There is some force in this contention, but it must be borne in mind that, according to the finding of the learned Judge himself, the value of the property in suit alone is about Rs. 10,000 and defendant 2 apparently owns some other property as well. It is contended that defendant 1 was not in a financial position to advance these sums of money. He is employed in the postal department on a salary of Rs. 95, and he says:

Formerly in my family a trade in ornaments and precious metals and in cloth was carried on. We also did money lending business then. After the partition in our family, myself and my brother got 20 or 22 thousands of rupees. Each of my two uncles also got the same' amount.

12. (After discussing evidence his Lordship concluded.) For the reasons which I have given I am of opinion that the plaintiffs have failed to establish that the sale deed in suit was without consideration or that it was not given effect to. Since the onus lay primarily on the plaintiffs and since they have failed to prove that the sale deed was a sham and inoperative transaction, the suit must fail and this appeal must be allowed:

Braund, J.

13. This appeal has arisen in circumstances which have been set out at length by rny learned brother and which it is not necessary for me to repeat. Two matters have been argued before us. First it is said that this is a suit under Section 53, T.P. Act, and accordingly, it not having been instituted' by the respondent-plaintiffs 'on behalf of all the creditors' as provided by that Section, it was beyond the jurisdiction of the lower Court to grant relief to the plaintiffs. The second contention argued went to the merits of the case and is that the learned Civil Judge was, in any event, wrong, on the evidence before him, in granting the plaintiffs a declaration that the property in question could be attached. I agree with the conclusions arrived at by my learned brother as to both these questions; and it is only on the first of them that I desire to add anything of my own.

14. The argument addressed to us by Mr. Sinha, on behalf of the appellant, to the effect that this was a suit, which was 'ab initio' 'defective' (I purposely use a neutral word) depends upon whether in fact this suit is one under Section 53, T.P. Act, at all. I confess that had it not been for the numerous authorities which have drawn a distinction between a creditor's statutory right of 'avoiding' or 'setting aside' an actual transfer upon the grounds enumerated in Section 53 of the Act and a right in the nature of a common law right, in certain circumstances, to have what is on its face a complete transfer declared wholly in operative on the ground of its being 'benami', 'fictitious' or 'sham'-various expressions are used in the authorities-I should have been tempted to take the view that the only right possessed by the creditor was the statutory one under Section 53, T.P. Act. For it is, to my mind, not altogether easy to see what legal footing (other than a footing conferred by statute) an unsecured creditor, whether he be a decree-holder or not, can, without recourse to insolvency proceedings, have to question any transaction of his debtor. And Order 21, Rule 63, Civil P. C, as I read it, does not itself confer a 'right' but only gives the creditor the opportunity of enforcing whatever rights he has by a civil suit. But this right has been too clearly recognized both in the Courts of India, including this one, and by the Judicial Committee of the Privy Council for it now to be questioned.

15. It must, I think, be accepted that in India a transfer which is in form in all respects a complete transfer complying with the formal provisions of the Transfer of Property Act may, nevertheless, by reason of its 'benami' or 'fictitious' character-fictitious not in the sense that the document is a forgery but in the sense that the transaction itself is not a 'real' one-be so inoperative that it transfers no estate and does not require even to be set aside in order to vest or re-vest the property in the transferor. It is in short as much a 'nullity' as if it had been forged. It may be that this is due to the absence of any distinction in India between a legal and an equitable estate. I think the character of a 'benami' transaction of this kind is best explained in the words of Sir Henry Mayne which are referred to in the judgment of the Privy Council in Petherpermal Chatty v. Muniandi Servai (1908) 35 Cal 551 at p. 102. And the effect of such a 'transfer' as distinct from a real transfer which, for some reason, is voidable or liable to be set aside, is also clearly recognized by Sir Lawrence Jenkins in Mina Kumari Bibi v. Bijoy Singh Dudhuria (1916) 3 AIR PC 238 at p. 670. There are numerous cases in the High Courts of India which have also clearly recognized the same principle to which my learned brother has referred and to which I need not refer again. I think, therefore, that we are bound to take the view that the statutory remedy provided by Section 53, T.P. Act is merely supplementary to the common law right of a creditor in execution proceedings to obtain a declaration that a transfer by a judgment-debtor, by reason of its 'benami' character, never operated as a transfer at all and accordingly, left the property it purported to transfer available to him in execution. In such a case there is nothing, as Sir Dinshaw Mulla points out in his book on the Transfer of Property Act, to which Section 53 can apply, for there is nothing which can be voidable.

16. What we have to do, therefore, is to see in the first place upon what footing the plaintiff has based his claim in this suit. Has he sought to have the transfer avoided under Section 53, T.P. Act or has he sought a declaration that it is 'benami' and so a nullity? There is language in the plaint itself in this case which is consistent with either view. And, if this suit is not in reality one under Section 53, T.P. Act, then quite evidently from the opening words of his judgment the learned Civil Judge himself was much misled. I have some sympathy with him. Throughout his judgment, he appears to have been a little confused between the two causes of action and the decree itself is non-committal. I am, however, unable to disagree with my learned brother that, on the whole, the plaint pleads a case of a 'benami' transaction rather than of a transaction under Section 53, T.P. Act. In para. 5 for instance it refers to the transaction as 'fictitious' and 'sham' and the relief it claims is scarcely appropriate to a suit under Section 53, T.P. Act. I think that the truth is that the draftsman of the pleading intended to plead his case as 'benami' transaction but was reluctant to part with some of the more robust expressions contained in Section 53, as to the evading of creditors. On the whole, and upon a fair view of the plaint, I agree that this is not a suit under Section 53, T.P. Act. I regret a little to have to reach this conclusion as I cannot help feeling that it provides a means of evading the Act.

17. As to the substantive question of whether the plaintiffs ought to have succeeded even upon this footing, I have little to add to what my learned brother has said. It must be borne in mind that the plaintiffs have set out to prove a case; not of an intention to evade or defraud creditors, but of an altogether 'benami' or 'sham' transaction. This, in my judgment, puts upon them an even greater burden than a plaintiff suing under Section 53, T.P. Act, has to bear. For he has only to prove an intention to defraud. And the onus lies heavily on the plaintiffs. For these reasons, I think that the plaintiffs fail unless they can show that the transaction was not a sale at all. Intention to defraud is not, in this view, by itself material. Mere inadequacy of consideration is by itself immaterial or a transaction may be a real one notwithstanding that it is dishonest or that the consideration is inadequate. Sir Lawrence Jenkins in the case I have referred to goes further. He says:

To the suggestion that the transaction was benami, a complete answer is furnished by the admission that the judgment-debtor owed the plaintiff the amount stated to be the consideration for the sale-deeds and more.

18. I agree in thinking that the plaintiffs' evidence in this case falls far short of proving that the transaction was not an actual and real one, whatever its purpose may have been. The plaintiffs have not proved that there was no consideration; and, if they have proved (which I doubt) that it was inadequate, that in itself is not, I think, material and, still less, conclusive. They have failed to prove, in my opinion, that the purchaser did not take actual possession whether under some ulterior and unproved arrangement with the vendor or not I do not know. At the highest, I think the evidence could justify no more than a suspicion that the transfer was not an honest one. But the evidence does not, I think, nearly approach the point of proving that there was no real transfer at all. If the plaintiffs chose to assume the burden of establishing a completely 'sham' transfer, it was necessary for them to prove it. They might have elected to sue under Section 53 and to have complied with its provisions. But they did not. To have taken that course might in the end have been the easier one. I cannot help feeling that, in view of the state of the law in such cases as these, the wise pleader would, at least, plead his case in the alternative. I agree, for these reasons, in thinking that this appeal must be allowed and the suit dismissed with coats, both in this Court and the Court below.

19. For the reasons given in our judgments we allow this appeal and set aside the decree of the Court below and we dismiss the plaintiffs' suit with costs in both Courts.


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