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Palaniandi Chetty and ors. Vs. M.V. Appavu Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported in34Ind.Cas.778; (1916)30MLJ565
AppellantPalaniandi Chetty and ors.
RespondentM.V. Appavu Chettiar and ors.
Cases Referred and Ishan Chunder Das Sankar v. Bishu Sirdar I.L.R.
Excerpt:
.....stands good until set aside in proceedings appropriate for the purpose, such proceedings being a suit brought for the express purpose by or on behalf of all the creditors of the transferor. 'every transfer of immovable property made with intent to defraud, prior or subsequent transferees thereof for consideration or co-owners or other persons having an interest in such property or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed. we are asked to say that in india the section may be called in aid by a creditor who has obtained a decree but has not attached the properties, it being conceded that a creditor who had attached the properties can use the section as a weapon of v defence as well as of offence in a..........stands good until set aside in proceedings appropriate for the purpose, such proceedings being a suit brought for the express purpose by or on behalf of all the creditors of the transferor.2. the material section re section 53 of the transfer of property act which is as follows: 'every transfer of immovable property made with intent to defraud, prior or subsequent transferees thereof for consideration or co-owners or other persons having an interest in such property or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed.'3. the section broadly reproduces the effect of the famous statute of elizabeth 13 eliz. c. 5 and the english decisions on that statute are always referred to in india as authorities for the.....
Judgment:

Coutts Trotter, J.

1. Although this appeal raises questions of difficulty and importance the facts material to it can be stated very shortly. The plaintiff sued for a declaration that he was the absolute owner by purchase of the suit properties as against the defendants who were holders of decrees against his vendor. The plaintiff's title was based on a sale deed dated the 5th of September 1903, from Vcelayudham Chetty to himself for a consideration of Rs. 14,250. It has been found that this deed and the transaction which is carried out was brought into existence with intent to defraud and defeat the creditors of the transferor, and that finding is not and cannot be challenged, but the appellant contends that it is not competent to the defendant to invoke that finding in aid in the present proceedings. For the moment, I am assuming that the transaction in question, was in this sense a real one, that it effected and was meant to effect a real transfer of the property from the transferor to the transferee, that is to say, it was not a merely colourable paper transaction, leaving the real beneficial enjoyment of the property with him who purported to transfer it. Had the transaction been a merely colourable one, it would no doubt have been void and the plaintiff could not have succeeded in his action. His contention is that if it is only voidable it stands good until set aside in proceedings appropriate for the purpose, such proceedings being a suit brought for the express purpose by or on behalf of all the creditors of the transferor.

2. The material section re Section 53 of the Transfer of Property Act which is as follows: 'Every transfer of immovable property made with intent to defraud, prior or subsequent transferees thereof for consideration or co-owners or other persons having an interest in such property or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed.'

3. The section broadly reproduces the effect of the famous Statute of Elizabeth 13 Eliz. C. 5 and the English decisions on that Statute are always referred to in India as authorities for the construction of the Indian section. In England it has been held that a suit to avoid, a settlement must be brought on behalf of all creditors, Reese River Silver Mining Company v. Atwell (1869) L.R. 7 Eq. 347 and that decision has been followed in Indian Hakim Lal v. Mooshahar Sahu I.L.R. (1907) C. 999 and Burjorji Dorabji Patel v. Dhunbai I.L.R. (1891) B. 1. But it has been held by the English Courts that where the plaintiff is a judgment-creditor who has sued-out a writ of Elegit he may sue on his own behalf without reference to the general body of creditors and impeach the transfer as having been executed with intent to defraud his particular claim. Blenkinsopp v. Blenkinsopp (1852) 1 De G.M. & G 495 : 42 Eng. Rep. 644. That case expressly loft open the question as to whether the deed could be set aside by a person who had signed the judgment but not sued out the writ. We are asked to say that in India the section may be called in aid by a creditor who has obtained a decree but has not attached the properties, it being conceded that a creditor who had attached the properties can use the section as a weapon of v defence as well as of offence in a case like the present. See Rajani Kumar Dass v. Gour Kishore Shah I.L.R. (1908) C. 1051, Chidambaram Chettiar v. Sami Aiyar I.L.R. (1906) M. 6. The matter has been definitely decided by the High Codrt of Bombay in Ishwar Tinapa v. Devar Venkappa I.L.R. (1902) B 146, a decision to which Jenkins, C.J. was a party. In the absence of a decision of this Court I propose to consider the matter on principle.

4. The remedy sought may be treated as the equivalent of a remedy by way of equitable execution, in aid of the legal right given by the Judgment. The English authorities subsequent to Blenkinsopp v. Blenkinsopp (1852) 1 De G.M. & G. 495 : Eng. Rep. 644 seem clearly to show that such an equitable execution, will not be granted until the, title of him who seeks it has been completed, that is to say, according to the technical language of the English law, a Judgment-creditor cannot invoke the equitable relief until he has followed up his Judgment by suing out a writ of Fi fa or Elegit as the case; may be. This was expressly decided by Turner V. G. (as he then was) in Smith v. Hurst (1855) 10 Hare 30, 68 Eng. Rep. 826 and he cites in his Judgment an interesting passage from Lord Reddesdale's Treatise on Pleading. An authoritative and clear exposition of the principle on which Turner, V. C. founded his decision is contained in Lord Gottenhan's opinion in Neate v. The Duke of Marlborough (1838) 3 Myl, & Cr. 407 : 40 E.R. 983. Applying that principle I think it must be held that the mere obtaining of a Judgment in India creates no title or only an inchoate title in the Judgment-creditor ; and therefore he must follow up his Judgment by attaching the properties in order to enable him to utilize Section 53 in answer to a claim founded on the impeached deed of transfer. The inconvenience of allowing each and every creditor in turn to attack the deed independently is obvious and is amply illustrated by the history of the present plaintiff who has been compelled to buy off a series of creditors one after the other. Accordingly I am of opinion that Iswar Tinappa v. Devar Venkappa I.L.R. (1902) B. 146, was correctly decided and is in accordance with principle and I respectfully follow it. I therefore hold that the fact that the deed was executed with intent to defraud the creditors of the transferor affords the defendants no answer to the plaintiffs claim.

5. As the learned Judge has not decided the question as to whether the transaction is merely colourable the case must go back to him for a finding on the point.

6. Six weeks are allowed for submission of finding and 7 days are allowed for filing objections.

Seshagiri Aiyar, J.

7. The property in this suit belonged to one Velayudham Chetty. He executed a sale deed to the plaintiff in respect of it on the 5th September 1903. It is not disputed that at the time of the sale, Velayudham Chetty was heavily involved in debt. The defendants in this suit had a number of decrees against him, for sums of money due to them before the date of the sale to the plaintiff. They attached the properties in execution of their decrees. The plaintiff filed a claim petition which was rejected in September 1910. Thereupon he filed the present suit for a declare ion that the property belonged to him by virtue of the sale and that Velayudham Chetty had no interest left in the property for the defendants to attach and sell-The Subordinate Judge who tried the original suit held that the sale was binding to the extent of Rs. 9,946 odd, as that sum was applied towards discharging certain mortgages upon the property created by Velayudam Chetty. He dismissed the suit as regards the rest of the claim put forward by the plaintiff. On appeal to the District Judge, the Subordinate Judge's decree was confirmed. In this second appeal a point was raised for the first time, by Mr. A Krishnaswami Aiyar to the effect that as the defendants had not sued to set aside the sale in favour of the plaintiff before they attached the properties in execution of their decrees, they were not entitled to resist the claim of the plaintiff in this suit. Mr. Ananthakrishna Aiyar objected to this contention being heard for the first time in second appeal, as he might have rectified the defect if the objection had been raised before the trial court. It is difficult to see what new evidence could have been let in by the defendants in answer to the abstract legal position argued in this court. The plaintiff's case is that at the time of the attachment Velayudham Chetty had no interest in the property because at that time no suit had been brought to set aside the sale in plaintiff's favour. To such a contention, if it is sound, the only answer will be that the sale had been set aside, in a properly framed suit. That is not the answer. The decision-in Hakinlal v. Mooshahar Sahu I.L.R. (1907) C. 999, where it was pointed out that an objection like this should not be entertained in second appeal does not help the respondents. In that case the suit was brought by some of the creditors, and when objection was taken in second appeal, that the suit should have been brought in a representative character, it was met by the plea that if the objection had been taken in time, this defect could have been cured. That is not the present case. Although it is unfortunate that this question was not raised in the earlier stages, I do not see my way to refusing to hear the question argued.

8. On the merits the first contention of Mr. Krishnaswami Aiyar was that under Section 53 of the Transfer of Property Act, it is not open to anyone of the creditors of the transferor to challenge the validity of the conveyance. He relied on the observations of Mookerjee and Holmwood, JJ. in Hakin Lal v. Mooshahar Sahu I.L.R. 11 B. 663 In the first place, it should be pointed out that Section 53 does not in terms apply to the present case as it is in Chapter II which preserves to Hindus, Mahomadans and Budhists their own law on the question covered by its provisions. This will not however materially affect the decision as there is nothing in the Hindu Law which is inconsistent with Section 53 of the Transfer of Property Act. See Bangil Bhai v. Vinayak Vishnu I.L.R. 11 B. 663. At any rate Section 53 may be taken as indicating the principles of equity, justice and good conscience which ought to guide courts in the absence of specific legislative provisions. The decision in Hakin Lai v. Mooshahur Sahu I.L.R. (1907) C. 999 no doubt lays down that it is settled law in England that if the debtor is alive and not a bankrupt at the time the action is brought to set aside a conveyance on the ground that it was voidable under Statute 13 Elizabeth, chapter 5, it should be by a creditor or creditors on behalf of himself or themselves and all other creditors of the debtor. The learned Judges say that the rule appears to be based upon a perfectly sound and intelligible principle and point out the difficulties which the contrary conclusion may lead to. Speaking for myself, there are as many difficulties in demanding that all the creditors should join in a representative action as there are in permitting a number of actions being brought against the same purchaser. However that may be, the language of Section 53 of the Transfer of Property Act, to my mind, is clear that any person who was defrauded, defeated or delayed can impeach the transaction.

9. Before dealing with the English Cases quoted by the learned Vakil for the appellant I wish to draw attention to Section 11, explanation 6 of the Code of Civil Procedure. That will apply to actions which may be brought by one of the defeated or delayed creditors if he claims a right which is common to himself and to other creditors similarly situated. It may be that Section 53 has been so worded having regard to the language of this explanation to Section 11 of the Code of Civil Procedure. The case in Hakim Lal v. Mooshahar Sahu I.L.R. (1907) C. 99 went up on appeal to the Judicial Committee but their Lordships did not decide the case on this point. See Mooshahar Sahu v. Lala Hakim Lal (1915) 30 M.L.J. 116. The only other Indian cases bearing on the question are Burjorji Dorabji v. Dhunbai I.L.R. (1891) B. 1, and Ishwar Tinappa. v. Devar Venkappa I.L.R. (1902) B 146. Among a number of points decided by Mr. Justice Telang in Burjorji Dorabji v. Dhunbai I.L.R. (1891) B. 1, the learned judge points out that the plaintiffs in that suit were only some of the creditors and that they were not entitled to succeed inasmuch as the suit was not filed by them on behalf of and for the benefit of all the creditors. When this decision was passed the Transfer of Property Act did not apply to the Bombay Presidency and the decision proceeded solely upon English authorities. Ishwar Tinappa v. Devar Venkappa I.L.R. (1902) B 146 was after the Transfer Property Act was applied to Bombay. It does not appear from the judgment that the learned Judges required that the other creditors should co-nomine be parties to the suit' Some observation of the Judicial Committee in Chaterput Singh v. Maharaj Bahadur I.L.R. (1904) C. 198 were relied upon by the appellant. The observation that such an issue could be raised and such a decree could be made only in a suit properly constituted for that purpose, do not necessarily imply that a representative action is the only mode of setting aside a fraudulent sale. Therefore I am of opinion on the language of Section 53 of the Transfer of Property Act that it is open to any creditor to impeach a conveyance made by his debtor provided he alleges in the plaint that the sale was intended to defraud him and others similarly placed. A decree in such a suit will not give any personal rights to the litigating plaintiff but would endure for the benefit of all creditors like himself.

10. The English cases to which our attention was drawn do not in unmistakable terms lay down that all the creditors should join in a representative action before a fraudulent sale can be set aside. All that Justice Williams in Vyse v. Brown (1884) 13 Q.B.D. 199 held was that the settlement should not be treated as void but it was liable to impeachment in a proper action. Clegg v. Bromley (1912) 3 K.B. 474 does not take the matter any further. But both these cases are authorities for the position that the assignment by the debtor will be good and valid until it is set aside in a proper proceeding. There are certain observations in May on Fraudulent conveyances which on their face appeared that a judgment-creditor was in a different position from an ordinary creditor and that it was open to the former by virtue of his Judgment to levy execution without having the assignment set aside in a suit for that purpose. The proposition is thus stated: - 'Where a creditor has a Judgment or order of Court, or process of execution in respect of his claim, and might obtain relief in equity there under against property held by, or in trust for, his debtor and the debtor is living, a Court of equity can declare a settlement by the debtor which is fraudulent within 13 Eliz. C. 5 to be void against the plaintiff without also declaring it to be void against the creditors generally, and may direct the settled property, or a. sufficient part of it, to be applied in satisfaction of the plaintiff's claim.' When the cases cited for this proposition are examined they show that if a Judgment was obtained at common law, and a further action was brought in the Equity Court to have it declared that the settlement or conveyance by the debtor in fraud of creditors was void, the Court of Chancery will not move in the matter until all the Common law remedies had been exhausted. See Smith v. Hurst (1845) 10 Hare 30, Neate v. The Duke of Maryborough (1833) 3 Myline & Craig. 407, and Rease River Silver Mining Co. v. Atwell (1869) 7 Eq. 347. But since the judicature Act and since the Act of Edward I which. define the rights of judgment-creditors, these decisions have no practical value. A judgment-creditor in England is in a very favourable position as compared with a judgment creditor in this country. He becomes practically the owner of the property which he seizes either under a writ of Elegit or of fi fa. I do not think the English decisions which differentiate between the position of the judgment-creditor and that of an ordinary creditor are of much use, in deciding Indian cases. The judgment-creditor in India for all practical purposes, is in the same position as any ordinary creditor. If he attaches the property it would give him no lien; if he realises monies they would be subject to participation by those who may be entitled to rateable distribution. But the position in England is altogether different. Therefore the passage in May relating to the judgment creditor has no relevancy in this country. Nor is there anything in the words of Section 53 to differentiate between the position of the decree-holder and that of an ordinary creditor.

11. The next question is whether the judgment-creditor can protect his rights to proceed against the property of the judgment debtor by pleading in defence that the sale which the plaintiff seeks to establish in the suit should be set aside. There is no question that if the sale is void or is found to be a sham transaction it will not be necessary either for the creditor individually or conjointly with others to sue to set aside the sale. But if it is only voidable it seems to me that the creditors can have no remedy against the property conveyed until the sale is set aside. It is well settled that in cases of voidable transactions until the transaction is avoided it continues in force. See Baja of Ramnad v. Arunachallam Chettiar (1918) 24 M.L.J. 592, and Mohamad Haji Zakaria v. Ahmad Bhai Habib Bhai I.L.R. (1900) B. 327. Therefore at the time that the creditor attached the property the sale was effective to confer title upon the plaintiff.

12. It was held by the Judicial Committee in Phul Kumari v. Ghanshyam Misra I.L.R. (1907) C 202, that the effect of a decree in a suit brought by a defeated claimant is to place the patties in the position they occupied at the time the claim was put in. Consequently if the defendant succeeds in his defence the result of it will be to allow him to attach the property as if it were the property of the judgment-debtor. This, as I already pointed out, can do him no good so long as the sale is not set aside. Therefore I am of opinion that the defendant is not entitled to avoid the sale by his defence. Mr. Anantakrishna Aiyar drew our attention to Vasudeo Bagunath v. Janardan Sadashiv I.L.R. (1915) B. 507. All that was decided in that case was that a subsequent transferee was not entitled to impeach a completed sale. It is true, that another answer to the defence could have been that the sale was subsisting at the time of the transfer. However, this is no authority for the position that without setting aside the sale a judgment-creditor can impeach the transaction as a defence to the action commenced by the purchaser. The point we have to decide was not considered in Narayana Pattar v. Raghavan Pattar I.L.R. (1899) M. 184, Chidambaram Ghettiar v. Sami Aiyar I.L.R. (1906) M. 6, and Ishan Chunder Das Sankar v. Bishu Sirdar I.L.R. (1897) C. 826, to which the learned Vakil for the respondents invited our attention. I have therefore reluctantly come to the conclusion that the objection raised by Mr. A. Krishnaswami Aiyar should be allowed.


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