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Chandarbhan Vs. Har Gopal and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported inAIR1914All424(2); 25Ind.Cas.183
AppellantChandarbhan
RespondentHar Gopal and ors.
Excerpt:
fraudulent transfer - intention to defraud fixture creditors--presumption--onus. - - the defendants in reply urged that it was a good and valid conveyance executed with the object of making provisions for the maintenance of the defend ants who had both legal and moral claims for it against the first defendant hargopal. they have held the conveyance to have been made at a time the vendor was not indebted at all to any one and have upheld it as a good family settlement and dismissed the plaintiff's suit. 7. the rule applicable to a case like this is thus stated in may on fraudulent conveyances and dispositions of property: ' 8. again in the well-known case of spirett v. it is enough if it is what the law regards as good, i......the settlement on the ground that it was made with the intention of defrauding and defeating future creditors, and that it is voidable as against him under section 53 of act iv of 1882. it is farther urged that as the judgment-debtor has no other property left in his possession the transfer has the effect of defeating future creditors, and that, therefore, the court ought to have presumed that the document was executed with the intention of defeating such creditors.5. prima facie, the vendor not being indebted to any one at the time, he was perfectly competent to dispose of his property by way of family settlement. the document was duly registered, and the future creditors who lent him money, with presumably a full knowledge of the fact that ho had no ostensible property from which.....
Judgment:

Sunder Lal, J.

1. Ono Hargopal was the owner of the property in suit, which on 6th February 1906 he conveyed to his wife and mother (the defendants Nos. 3 and 2) by way of family settlement. He was not indebted to any one at that time. The document was intended to make some provision for thorn. Ha had no other property left with him on that date.

2. On 6th August 1933 the present plaintiff brought a suit against Hargopal claiming a sum of Rs. 260 on foot of a hundi bearing1 date 3rd January 1936. August 17th, 1906, was fixed for the hearing of the case, but on 13th August 1933 the defendant filed a confession of judgment on which a decree was duly made against him on 17th August 1906. In execution of this decree the property in suit was attached as the property of Hargopal, bat was released on objections taken by the defendants on 3rd July 1910. Hence the present suit by the decree-holder to obtain a declaration that the said conveyance was fraudulent and collusive, and that it was void as against the plaintiff. The defendants in reply urged that it was a good and valid conveyance executed with the object of making provisions for the maintenance of the defend ants who had both legal and moral claims for it against the first defendant Hargopal. They further urged that the hundi on which the plaintiff had obtained the decree of 17th August 1906 was collusive and without consideration and that it had been antedated to make it out that the plaintiff was a creditor of the first defendant on the date the transfer was made by him to the other defendants.

3. Both the Courts below have found that the hundi in question had been antedated. They doubt very much the fact of the plaintiff being really a creditor at all, but without committing themselves to a definite finding on the point, they hold that ho was not a creditor at all on the date of the execution of the family settlement. They have held the conveyance to have been made at a time the vendor was not indebted at all to any one and have upheld it as a good family settlement and dismissed the plaintiff's suit.

4. The plaintiff appeals against the decrees of the Courts below. The first point urged on behalf of the plaintiff-appellant is that as a subsequent creditor he is entitled to impugn the settlement on the ground that it was made with the intention of defrauding and defeating future creditors, and that it is voidable as against him under Section 53 of Act IV of 1882. It is farther urged that as the judgment-debtor has no other property left in his possession the transfer has the effect of defeating future creditors, and that, therefore, the Court ought to have presumed that the document was executed with the intention of defeating such creditors.

5. Prima facie, the vendor not being indebted to any one at the time, he was perfectly competent to dispose of his property by way of family settlement. The document was duly registered, and the future creditors who lent him money, with presumably a full knowledge of the fact that ho had no ostensible property from which they could recover the advances they might make, did so with their eyes open and have only themselves to thank if they find it not possible to recover now what is due to them. A creditor who under these circumstances takes the precaution of fraudulently antedating his hundi so as to pose as an existing creditor on the date of the transfer, must be taken to have knowledge of the transfer when ho lent the money.

6. The question is, can such future creditor impugn the transfer and if so, on what grounds?

7. The rule applicable to a case like this is thus stated in May on Fraudulent Conveyances and Dispositions of Property: 'Whore the settler was not indebted at the time, the onus of proving the fraud is -thrown on those who impeach the settlement, for fraud is not to be presumed. The facts that all the debts due at the date of the settlement have been paid since, and that the only debts duo are those subsequently contracted, negative the inference of intent to defeat delay, or defraud creditors drawn from the indebtedness at the time. The mere fact of subsequent indebtedness is not evidence of a fraudulent intent against subsequent creditors.'

8. Again in the well-known case of Spirett v. Willows 3 De. G.J. & S. 293 at p. 302 : 34 L.T.Ch. 360 : 11 Jur. (N.S.) 70 : 11 L.T. 614 : 13 W.R. 329 : 46 Eng. Rep 649 at p. 653 : 142 R.R. 65 : 5 Giff. 49 the Lord Chancellor Westbury thus points out the position, of future creditors in such cases: 'But If a voluntary settlement or deed of gift be impeached by subsequent creditors whose debts had not been contracted at the date of the settlement, then it is necessary to shew either that the settlor made the settlement with the express intent to, delay, hinder or defraud the creditors' or that after the settlement the settlor had no sufficient means or reasonable expectation of being able to pay his then existing debts', and I have italicized the word then in the above quotation. It may be noted that the rule applies to the case of the then existing debts. In In Re: Lane-Fox; Ex parte Gimblett (1900) 2 Q.B. 508 at p. 513 : 69 L.J.Q.B. 722 : 48 W.R. 650 : 83 L.T. 176 : 7 Mimson. 295 Wright, J., after quoting the above passage observes: I think no decision can be found anywhere inconsistent with the proposition that an honest settlement, affirmatively proved, to be honest, ought not to be set aside merely because some years afterwards it is proved to have the effect of defeating or delaying subsequent creditors.' Unless, therefore, it can be shown that the transferor at the time of making the transfer had made it with the express intention of defeating future creditors, the transfer, cannot be avoided. As observed by Mr. Justice Ranade in Sadashiv Varnan Dhamankar v. Trimbak Divakar 23 B. 146 at p. 156 : Such transactions do not become colourable merely because, in their ultimate consequences, they may have the effect of protecting the family property against the prospective extravagance of the settlors or because no adequate consideration is shown to have been paid by the party benefited.

9. The consideration-in such cases need not be valuable. It is enough if it is what the law regards as good, i.e., natural affection for wife and children. There is nothing illegal in such a conveyance if it is made bona fide, and is not intended to defraud creditors. When the father is involved in debts and makes a settlement, mala fides is presumed. But when there is no such indebtedness, no 'mala fides can be presumed merely from the possibility that the settlement might prejudice the claims of subsequent creditors'.

10. Another case resembling in many of its aspects the present case where this rule was followed by Mr. Justice Chandavarkar as the case of Ebrahim v. Foolbai 4 Bom. L.R. 180. In this case actual intentions to defraud future creditors when making the transfer is not ascribed to Hargopal There is no proof of it, and it cannot be presumed in this case on the authorities quoted above.

11. On the findings, therefore, I must affirm the decrees of the Courts below and dismiss the appeal with costs including in this Court fee on the higher scale for respondents.


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