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S. Shaukat Ali Vs. B. Sheo Ghulam and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1936All663; 165Ind.Cas.124
AppellantS. Shaukat Ali
RespondentB. Sheo Ghulam and anr.
Excerpt:
.....if the transferor alone had that intention and the transferee did not share the intention he would be a transferee in good faith and for consideration and his rights would not be impaired by anything contained in section 53. but if the transferor and the transferee are actuated by the common intention to defraud creditors there is no good faith and the transfer will not stand even though full consideration had passed. kulsuman, and they obviously wanted to get the better of sheo ghulam because on the very day when the order for attachment was passed they had the sale-deed executed and registered, so that they may be in a position to assert that the order of attachment was not actually served either on the property or on mt. connected with this plea is the plea that section 53 cannot be..........one mt. kulsuman bibi, who is defendant 2 in the present suit, was indebted to mt. kasturi and to sheo ghulam. mt. kasturi held a mortgage and on the basis of that mortgage she brought a suit for sale, impleading mt. kulsuman, the mortgagor, and sheo ghulam, the subsequent mortgagee. she obtained a final decree on 28th october 1927 and applied for execution of the decree by sale of the mortgaged property. the property was advertised to be sold on 21st january 1929, but the sale was avoided because on 5th january 1929 mt. kulsuman sold the property to the plaintiff shaukat ali for rs. 8,000. the details of the sale consideration are that:rs. a. p. 6,321-10-0 were to go towards the payment of the decretal amount due to mt. kasturi. 278-6-0 were paid for costs of executionand.....
Judgment:

Bajpai, J.

1. This is an appeal by the plaintiff whose suit was dismissed by the learned Subordinate Judge of Farrukhabad. It appears that one Mt. Kulsuman Bibi, who is defendant 2 in the present suit, was indebted to Mt. Kasturi and to Sheo Ghulam. Mt. Kasturi held a mortgage and on the basis of that mortgage she brought a suit for sale, impleading Mt. Kulsuman, the mortgagor, and Sheo Ghulam, the subsequent mortgagee. She obtained a final decree on 28th October 1927 and applied for execution of the decree by sale of the mortgaged property. The property was advertised to be sold on 21st January 1929, but the sale was avoided because on 5th January 1929 Mt. Kulsuman sold the property to the plaintiff Shaukat Ali for Rs. 8,000. The details of the sale consideration are that:

Rs. a. p. 6,321-10-0 were to go towards the payment of the decretal amount due to Mt. Kasturi. 278-6-0 were paid for costs of executionand registration.400-0-0 were paid as earnest money. 1,000-0-0 were paid in cash before the sub-Registrar.

2. It is common ground that the decretal amount of Mt. Kasturi was paid up by Shaukat Ali although not quite immediately. The Court below has come to the conclusion that Rs. 278-6-0 put down in the sale-deed as having been paid for execution and registration of the document is a bit exaggerated and that Rs. 125 seems to be ample for the purpose. He has no doubts as to the genuineness of Rs. 1,000 paid in cash before the Sub-Registrar but is of the opinion that the evidence to prove the payment of Rs. 400 as earnest money is not reliable. About the time that Mt. Kasturi obtained her final decree on the basis of her mortgage suit Sheo Ghulam instituted a suit against Mt. Kulsuman on the basis of three mortgages which he himself held. They are dated 11th June 1921, 3rd October 1922 and 16th December 1922, and it appears that the property mortgaged to him was practically the same which had been mortgaged to Mt. Kasturi. He, when he came to know that; the mortgaged property was about to be sold in execution of a decree on a prior mortgage, made a statement through his pleader on 19th December 1928 relinquishing the mortgaged property and prayed for a simple money decree. On the basis of this statement Sheo Ghulam obtained a simple money decree on the same date for Rs. 2,967-3-0 and Rupees 328-10-0 costs.

3. It is also clear that he came to know of the negotiations between Mt. Kulsuman and Shaukat Ali-negotiations which culminated in the sale-deed of 5th January 1929-and therefore on 2nd January 1929, before the decree in his suit had been actually drawn up, applied for execution of the decree by attachment of the property which was sold three days subsequently to Shaukat Ali. The order for attachment was passed on 5th January 1929 although the property was actually attached on 28th January 1929. On the date when the order for attachment was passed the sale-deed which is the basis of the present suit was being executed in Chhibramau between 2 and 3 p.m. and was presented for registration between 3 and 4 p. m.

4. When the property was attached under the orders of the Court Shaukat Ali intervened and filed an objection under Order 21, Rule 58 alleging that the property sought to be attached was not the property of the judgment-debtor, it having been transferred to him. This objection of Shaukat Ali was dismissed by the executing Court on 3rd August 1929 and Shaukat Ali therefore brought the present suit under the provisions of Order 21, Rule 63 on 3rd September 1929 on the allegation that the sale-deed in his favour dated 5th January 1929 had the result of transferring the ownership in the property from Mt. Kulsuman, the judgment-debtor of Sheo Ghulam to the plaintiff, and therefore Sheo Ghulam, defendant 1 was not entitled to put the property to sale in execution of his decree in suit No. 40 of 1927. It is nowhere specifically stated in the plaint that Sheo Ghulam is not entitled to put the property to sale by reason of the provisions of Order 34, Rule 14 and that explains why no issue was struck on the point, nor any finding recorded by the learned Subordinate Judge. But in appeal before us the point has been argued by Mr. Aziz on behalf of the plaintiff-appellant and we shall dispose of that plea at the proper place.

5. The defence was that the sale-deed was entirely fictitious, that it did not convey any title to the plaintiff. Section 53, T.P. Act, in terms was not pleaded, but it was undoubtedly alleged in paras. 11 and 12 of the written statement that the plaintiff was not a bona fide purchaser and that Mt. Kulsuman and the plaintiff had collusively tried to deprive the contesting; defendant and other creditors of the amount due to them by means of the sale-deed. The learned Subordinate Judge gave effect to the defence based on the plea of Section 53, T.P. Act, and we are of the opinion that the plaintiff has not in any way been prejudiced or taken by surprise because he knew perfectly well in the Court below that the case was being fought on the lines of Section 53, T.P. Act.

6. We have now got to decide whether the finding of the Court below that the sale-deed in suit was executed fraudulently with an intent to defeat or delay the rights of the creditors is a correct finding. The contention of learned Counsel for the appellant is that he paid good money for the sale deed in question and that the major portion of the sale consideration went to pay a prior mortgage decree, in execution of which the property had already been advertised for sale, and as such the genuineness of the transaction cannot be impeached. To this extent we agree with the contention that although there might be some suspicion regarding some minor items of the sale consideration which are more or less insignificant it cannot be disputed that the plaintiff paid a sum of about Rs. 8,000 either to Mt. Kulsuman or to her prior creditor, but the question which is the principal question under Section 53, T.P. Act, viz., whether the transfer was made with intent to defeat or delay creditors, still remains to be decided. It may be made clear that if the transferor alone had that intention and the transferee did not share the intention he would be a transferee in good faith and for consideration and his rights would not be impaired by anything contained in Section 53. But if the transferor and the transferee are actuated by the common intention to defraud creditors there is no good faith and the transfer will not stand even though full consideration had passed.

7. The facts which lead us to agree with the finding of the Court below may be briefly stated. The plaintiff is a relation of Mt. Kulsuman; the plaintiff is a neighbour of Sheo Ghulam; it is admitted by him that he knew that Mt. Kulsuman was indebted to Sheo Ghulam and Mt. Kasturi. It is also clear that the plaintiff knew of the suit which Sheo Ghulam had instituted against Mt. Kulsuman for the recovery of his money on the three mortgagee deeds, for it is admitted by the plaintiff that in December 1928 Sheo Ghulam had told him that Sheo Ghulam had given up his mortgage security and obtained a simple money decree. The negotiations for the sale deed in question were made eight or ten days before the execution of the sale-deed and it was settled actually on 1st or 2nd January 1929 or 28th or 29th December 1928. Sheo Ghulam obviously came to know of these hurried negotiations; and, as we stated before, on 2nd January 1929, before the preparation of the decree in his favour, applied for execution of the same by attachment of the property covered by the subsequent sale-deed in plaintiff's favour. He obviously wanted to forestall the plaintiff and Mt. Kulsuman, and they obviously wanted to get the better of Sheo Ghulam because on the very day when the order for attachment was passed they had the sale-deed executed and registered, so that they may be in a position to assert that the order of attachment was not actually served either on the property or on Mt. Kulsuman. The dates speak for themselves and it is clear that the object of the plaintiff and Mt. Kulsuman was to obstruct and delay Sheo Ghulam who had obtained a simple money decree in his favour and as the result of the transaction no property remained available to Sheo Ghulam from which he could realise his money. The plaintiff admits that to his knowledge Mt. Kulsuman has got no property left and the fact that the plaintiff purchased not only the property which had been mortgaged to Mt. Kasturi and to Sheo Ghulam but also certain groves and a house and Khandhars shows that he wanted to take away every item of available property from the reach of Sheo Ghulam. The entire circumstances therefore lead one irresistibly to the conclusion that the fraudulent intention of the judgment-debtor transferor was shared by the transferee, the plaintiff before us. The finding of the Court below therefore on this point is correct.

8. It was then contended that Sheo Ghulam cannot be said to be a creditor of Mt. Kulsuman and in no event can he be said to be a creditor who is entitled to sell the property which he proposes to sell by reason of the bar contained in Order 34, Rule 14, Civil P.C., and as such he is not entitled to seek the avoidance of the transfer in the plaintiff's favour. Connected with this plea is the plea that Section 53 cannot be pleaded in defence by a creditor who has been defeated or delayed and that if he wants to avoid a transfer he must bring a representative suit on behalf of all the creditors. We might dispose of this connected plea very shortly by simply saying that almost all the Courts in India are now agreed that the plea can be taken in defence as well. We might mention the cases in M.N.L. Ramaswami Chettiar v. Mallappa Reddiar 1920 43 Mad 760, Ram Chand v. Mathura Chand 1921 19 ALJ 299 and Abdul Kader v. Ali Mia (1912) 16 CWN 717. Whatever doubts there may have existed have been removed by the observations of their Lordships of the Privy Council in Ghunsham Das v. Umapershad 1919 23 CWN 817. As to the main plea it is enough to say that Sheo Ghulam is undoubtedly a creditor of Mt. Kulsuman and as such he is entitled to raise the plea of Section 53, T.P. Act.

9. It is, however, said that although he had relinquished the mortgage security when he had brought his suit, yet he is not entitled to put the self-same mortgaged property to sale in execution of his simple money decree. It is true that by a mere declaration that the mortgage security has been relinquished the mortgagee does not become entitled to put the mortgaged property to sale in execution of his simple money decree because the decree which he obtains is in satisfaction of a claim arising under the mortgage and his declaration that be gives up the mortgage security, unsupported since it is by any consideration, might not be capable of enforcement and cannot be regarded as an extinguishment of the mortgagee rights. The bar contained in Order 34, Rule 14 is for the benefit of the mortgagor, for it is clear that where a mortgagee brings a regular suit for sale and a decree is passed in such a suit, what would be sold is the mortgaged property free from the mortgage, whereas in the other case, where the suit is not for sale but on the mortgage debt, what would be sold is the mortgaged property subject to the mortgage and that would only be the mortgagor's equity of redemption. Being subject to the unascertained claim of the mortgagee, the property would not fetch a fair value at the sale and the mortgagee would be enabled to purchase it at an unduly low price. If a stranger purchases it at the sale without notice of the mortgage he would be subjected to great hardship unless the mortgagee could be held to be estopped from asserting his rights under the mortgage against such a purchaser. Order 34, Rule 14 provides that the subsequent suit by the mortgagee would not be barred by reason of anything contained in Order 2, Rule 2. There is yet another reason why the legislature in its wisdom enacted Order 34, Rule 14. The mortgagor in a mortgage suit has six months after the preliminary decree for payment of the amount and indeed can pay it up till the property is actually put up to sale. In the case of a simple money decree he gets no period of grace and it would obviously be unjust if the mortgagor by reason of the device adopted by the mortgagee loses the facilities which an ordinary suit for sale ensures.

10. We are in agreement with the learned Counsel for the appellant that it is not open to a creditor who has obtained a simple money decree in satisfaction of a claim arising under the mortgage to put the mortgaged property itself to sale in execution of his decree as long as the mortgage subsists, but after our finding that the sale-deed in favour of the plaintiff is liable to be avoided the plaintiff has no locus standi to ask for a declaration that the defendant is not entitled to put up the property to sale. Sheo Ghulam is undoubtedly a creditor of Mt. Kulsuman and the plaintiff simply by reason of having obtained a voidable transfer from Mt. Kulsuman does not become clothed with all the rights which Mt. Kulsuman herself might possess when property belonging to her is being sold by Sheo Ghulam. It might have been open to Mt. Kulsuman to resist the present execution petition of Sheo Ghulam, but that right is not vested in any way in the plaintiff by reason of the voidable transfer in his favour. Moreover the declaration which the plaintiff wants in the present suit is that no portion of the property which is the subject-matter of the suit is fit for sale by auction in execution of the decree in Suit No. 40 of 1927. The declaration that we have been invited to give by the present suit is a declaration of a permanent nature to have effect for all time to come, and, this declaration it is clear, cannot be given. In course of time the mortgages in favour of Sheo Ghulam would lapse by efflux of time, whereas the decree in favour of Sheo Ghulam could be kept alive for some considerable time and then the bar of Order 34, Rule 14 would not exist as was held in the case of Chedi Lal v. Saadat-un-nissa Bibi 1917 14 ALJ 902. It may be mentioned here that Order 34, Rule 14 has no application so far as the house, the grove and the khandars are concerned, which as far as we know were never mortgaged to Sheo Ghulam. On the whole we are of the opinion that there is nothing in the plea of Order 34, Rule 14 which would entitle us to give a relief to the plaintiff whom we have held to be a transferee having the intention to defeat or delay the creditors of the transferor.

11. The question whether the plaintiff has or has not acquired any priority by reason of having paid the decretal amount on the prior mortgage of Mt. Kasturi and can in any way enforce such priority does not arise at this stage. The view taken by the Court below is correct and we dismiss this appeal with costs.


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