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Palamalai Mudaliar Alias Palamalai Pillai Vs. the South Indian Export Company Ltd. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1910)20MLJ211
AppellantPalamalai Mudaliar Alias Palamalai Pillai
RespondentThe South Indian Export Company Ltd.
Cases ReferredIn Chidambaram Chettiar v. Sami Aiyar I.L.R.
Excerpt:
.....the judgment-debtors and allowed them to take it away before his own claims as transferee of the mortgage-decree were satisfied. it is one of the extraordinary circumstances of the case that we find the defendant who was not in a position to pay for the suit lands, purchasing other lauds as well on the 4th april (exhibit vi) from a third party for rs. in this state of things, although the plaintiffs have failed to prove that the sale deed exhibit ii was fictitious in the sense that it was intended not to be operative, one cannot help wondering whether the real transaction is before the court and, in any case, annamalai appears to be the person mainly interested in the result of this litigation. 1. page 18 (11th edition) has been followed as good law in hale v. 825, but none the less..........of the present case. then on the 10th march we find annamalai chetty taking a transfer of the mortgage decree against the judgment-debtors and their family in respect of the suit lands for rs. 7,232-1-0. it was admittedly at the request of the judgment-debtors that annamalai took this transfer at a time when the plaintiffs' decree was in course of transmission from the high court to the negapatam court; and it is also, i think, clear that he took it with a view to assist the judgment-debtors to defeat the plaintiffs. not only did he advance to the present defendant the bulk of the purchase money for the sale now in question, but on the same day he himself purchased other lands of the judgment-debtors for rs. 4,000 which was to be paid to a member of the judgment-debtors' family for.....
Judgment:

Wallis, J.

1. The question whether the sale in favour of the defendant, Exhibit II, is voidable at the instance of the vendor's creditors depends on the inference to be drawn from a number of circumstances attending the sale. The plaintiffs had obtained a decree in the High Court against Madarsa Rowthar and Sheik Davood on the 21st October 1902. On the 22nd January 1903 a petition was put in for transfer of the decree to the Subordinate Judge's Court of Negapatam for execution, and on the 25th March 1903 and the 26th March 1903 two execution petitions were put in the Subordinate Judge's Court for execution, Exhibits B and B1, praying for the arrest of the defendants in the suit and for the attachment of their properties including the property which is the subject of the present suit. In support of these petitions an affidavit, Exhibit B2, was sworn by the plaintiffs' agent on the 20th March 1903 and filed on the 28th March 1903, in which it was alleged that some of the properties were mortgaged and that the defendants in the suit were trying to sell the scheduled properties, to discharge only the mortgage-debt and to appropriate the balance. The Court ordered the attachment of certain houses but not of the lands, as the Revenue Registers had not been filed; and on the 2nd April the plaintiff's agent swore another affidavit, Exhibit B4, stating that the defendants having come to know of the execution proceedings, were, with a view of defrauding the decree-holders, selling the lands in Ottathattai village to the present defendant, that the stamp paper had been purchased, and that the sale deed was being written. The affidavit was filed on the 3rd April 1903. As to the fact of the sale the deponent's information was correct. The sale deed Exhibit II was executed on the 2nd April at Negapatam and presented for registration at Tirupundi, ten miles off, next day by Madarsa Rowthar, the senior vendor, and execution was admitted by the other vendors on the 5th April.

2. Now the defendant's story is that he had been in treaty for the purchase of these lands as far back as October 1902 before the date of the plaintiffs' decree. I am, however unable to accept his evidence on this point. It seems to me highly improbable that the defendant, who was an employee of the South Indian Railway on a small salary, and had been investing his modest savings for over twenty years in small purchases of land in the Conjeeveram Taluq of the Chingleput District, should, of his own accord, have embarked upon purchases of lands in the Tanjore District so far beyond his means as the event has proved. Between 1883 and 1902 Exhibits VII series show that he had made purchases for Rs. 2,644 in all, the largest single purchase being for Rs. 1,500 in 1899, whereas in this transaction he becomes, as will be seen, a purchaser for Rs. 17,500. However this may be, the evidence that he was negotiating for the purchase of these lands in October 1902 seems to me untrustworthy. H is story is that the sale went off because of a difference as to price; and as corroboration he produces two stamped papers of eight annas each which he says he purchased before a price had been settled. This seems to be most improbable. Old stamped papers are easily procurable, and in the present cases they were purchased from a stamp vendor who is also the writer of the sale deed Exhibit II. The story of the 2nd defence witness that he fixed Rs. 16,000 as the price without troubling to ascertain what was due on the mortgage also seems to me most improbable. As pointed out by the Advocate-General, he is an intimate friend of Annarnalai Chetty who is the person most interested in the whole transaction, as will be seen, and he has to make admissions which affect his credit as a witness. Further it must be remembered that in cases of this kind local sympathies are apt to be with the debtors and their transferee and against persons in the position of the plaintiffs.

3. In my opinion we must put aside this evidence and begin with the order of the High Court, dated the 21st January 1903, transferring the plaintiffs' decree for execution to Negapatam. We next come to two transactions in which Annamalai Chetty figures. He was a money-lender at Negapatam, had a mortgage on other lands of the judgment-debtors, and was clearly doing his best to help them to defeat the plaintiffs' execution. Exhibit XIV is a promissory note bearing date the 21st February 1903 executed by Annamalai Chetty in the defendant's favour for Rs. 4,000, which eventually supplied all the purchase money found by the defendant, the remaining Rs. 11,000 being advanced by Annamalai. Nothing was directly elicited to cast doubt on the date or consideration for the promissory note, but it bears a very curious endorsement of discharge on the 20th March 1903 which, I agree with the Subordinate Judge, was fabricated for the purposes of the present case. Then on the 10th March we find Annamalai Chetty taking a transfer of the mortgage decree against the judgment-debtors and their family in respect of the suit lands for Rs. 7,232-1-0. It was admittedly at the request of the judgment-debtors that Annamalai took this transfer at a time when the plaintiffs' decree was in course of transmission from the High Court to the Negapatam Court; and it is also, I think, clear that he took it with a view to assist the judgment-debtors to defeat the plaintiffs. Not only did he advance to the present defendant the bulk of the purchase money for the sale now in question, but on the same day he himself purchased other lands of the judgment-debtors for Rs. 4,000 which was to be paid to a member of the judgment-debtors' family for a debt alleged to be due by them to her but by no means clearly proved.

4. Next we have Exhibit III, dated the 20th March, which purports to be a receipt given by Sheik Davood, one of the judgment-debtors, and Pakkiri Mahomed a member of the family, for Rs. 4,000, received from the defendant at the time of the alleged agreement for sale of the lands now in question, and the corresponding endorsement by the defendant of the discharge of Annamalai's pronote, Exhibit XIV, for Rs. 4,000 by payment of that amount to 'Pakkiri Mahomed and others of Manjakollai' the judgment-debtors' family, which is witnessed by Pakkiri Mahomed and Sheik Davood. I agree with the Subordinate Judge that these documents are unreliable. The fact that they are signed by Pakkiri Mahomed and Sheik Davood and not by Madarsa Rowthar, who was the head of the family, and effected the sale and got the sale deed registered certainly points to their having been got up for the purposes of the present case after his death in December 1903. If there had been such an agreement and payment on the 20th March, it would have been mentioned in the sale deed Exhibit II. Further it is most unlikely that Annamalai Chetty would have paid over Rs. 4,000 to the judgment-debtors and allowed them to take it away before his own claims as transferee of the mortgage-decree were satisfied. The conclusion I have come to is that the recital in Exhibit II that Rs, 4,000 had been paid previously was put in hurriedly to negative the inference that the sale was being effected to defeat and delay the plaintiffs and that Exhibit III and the endorsement to Exhibit XIV were fabricated subsequently to support this.

5. We next come to the execution of the sale deed Exhibit II to the defendant on the 2nd April after the judgment debtors' houses had been attached at the instance of the plaintiffs and while proceedings for the attachment of the lands in question were pending. It is one of the extraordinary circumstances of the case that we find the defendant who was not in a position to pay for the suit lands, purchasing other lauds as well on the 4th April (Exhibit VI) from a third party for Rs. 2,500, also with money found by Annamalai. The total purchase money, Rs. 17,500 is said by the defendant to have been made up of the Rs. 4,000 due to him on Annamalai's promissory note, Exhibit XIV, and of Rs. 14,000 advanced to him by Annamalai on the 4th April by a mortgage (Exhibit XV) bearing interest at 12 percent, of all these lands and also of the lands previously purchased by the defendant. The defendant says he expected to make 6 percent. on his purchase money, so that the transaction on the face of it was a ruinous one. Nearly three years later, in December 1906, at the time of the trial, the defendant had not paid Annamalai anything on the mortgage for principal or interest which had mounted up to Rs. 19,000, and Annamalai had not entered up satisfaction of his decree in consideration of the Rs. 7,500 paid to him under Exhibit II, so that he was still at liberty to execute his decree against the suit lands. In this state of things, although the plaintiffs have failed to prove that the sale deed Exhibit II was fictitious in the sense that it was intended not to be operative, one cannot help wondering whether the real transaction is before the Court and, in any case, Annamalai appears to be the person mainly interested in the result of this litigation.

6. The question before the Court is, was the sale under Exhibit II on the 2nd April intended to defeat and delay creditors' and if so, is it voidable against the defendant? Now if, as found by the Subordinate Judge, the intention of the vendors was to put their property beyond the reach of the creditors by converting it from land into cash, that would, I think, bring the case within Section 53 of the Transfer of Property Act. In this country, at any rate, that is the most obvious and effective method of defeating and delaying creditors. We have of course, been referred to Wood v. Dixie (1815) 7 Q.B. 892 which, as observed in Smith's Leading Cases, Vol. 1. page 18 (11th Edition) has been followed as good law in Hale v. Saloon Omnibus Company (1859) 4 Drew 492 and Darvill v. Terry (1861) 6 H. & N. 807. The first two cases were cited in Ishan Chunder Das Sarkar v. Bishu Sirdar I.L.R. (1897) C. 825, but none the less the learned Judges observed, and I agree with them, that 'it would be almost a contradiction in terms to say that a transferee for value, who takes the transfer with the intention of helping the transferor to convert his immovable property into money which can easily be concealed, and thus to defeat or delay his creditors, should nevertheless be treated as a transferee in good faith, and the transfer to him should be upheld, though Section 53 says that a transfer made with such intention is voidable at the option of creditors.' The same view has been taken in Hakim Lai v. Mooshahar Saku I.L.R. (1907) C. 999 in the exhaustive judgment of Mookerjee and Holmwood JJ. in which it is shown to be supported by the great authority of Lord Mansfield and by decisions of the Irish and American Courts.

7 The question therefore is, was the sale under Exhibit II effected for the purpose of defeating and delaying creditors by enabling the judgment debtors to convert their land into cash? Now if the sale was, what it purports to be on the face of the document, a sale for Rs. 15,000, of which Rs. 7,500 was paid to Annamalai in discharge of his mortgage-decree and the balance Rs. 7,500 to the vendors, then I think the embarrassed circumstances of the vendors, the fact that the sale was hurried on after their houses had been attached and when the attachment of their lands was imminent, the hurried registration, the sale of other lands the same day to Annamalai for a suspicious consideration, all these things go to show that it was effected for the purpose of defeating and delaying creditors, and that is the finding of the lower Court. It is said, however, that the sale was effected with the intention of paying the balance to two secured creditors of the vendors, Rs. 3,500 to Annamalai himself on account of a mortgage Exhibit XVI for Rs. 5,000 effected in 1893, and Rs. 3000 to another mortgagee, one Ramachendra Naidu, under a mortgage Exhibit IX for Rs. 18,000 effected in 1893. Now if the sale was effected with the object of preferring these two creditors to the plaintiffs and the other creditors, it is clear and is admitted that the sale would not be voidable under Section 53 of the Transfer of Property Act, but the burden of proving this, where the sale appears otherwise to be voidable, is on the defendant (Narayana Pattar v. Viraraghavan Pattar I.L.R. (1900) M. 184 and should be established by satisfactory evidence. The finding of the lower Court is that the judgment-debtors apprehending that they could not conceal the intention with which they had sold the property to the defendant and escape from liability for arrest without accounting for the Rs. 7,500 in question subsequently gave Rs. 3,000 to Ramachendra Naick and Rs. 3,500 to Annamalai Chetty. Unless we can say that this finding is wrong, the defence fails. Now the evidence put forward by the defence as to the dates and circumstances in which these two payments were made is of a most unsatisfactory character and fails, in my opinion, to show that there was any idea of making these payments when Exhibit II was executed. Exhibit II mentions that Rs. 7,500 was to go in satisfaction of Annamalai's mortgage but says nothing of the balance being paid, Rs. 3,500 to Annamalai, and Rs. 3,000 to Ramachendra Naidu, and the evidence as to why they were not mentioned is most unsatisfactory. The defendant says it was intended to enter them. Annamalai says the writer of the deed was told to enter the payment to him but did not do so. Sheik Davood, one of the judgment-debtors, says the payments were not entered because it had not yet been settled how much was to be paid to each creditor. It is also curious if Exhibit II and the endorsement on Exhibit XVI formed part of the same transaction, different writers of the deed and the endorsement should have been employed. The Advocate-General went further and contended that this was a fictitious debt, that the mortgage debt due under Exhibit XVI, a mortgage for Rs. 5,000 dated the 20th May 1893 to Annamalai, had previously been discharged or released, but in my opinion he failed to prove this, although it is, no doubt, strange that Rs. 1,995 should have been paid for principal and interest in October 1895 as shown by an endorsement of that date, but that there should have been no further payment until the 2nd April 1903, the date of Exhibit II. But, for the reasons already given, I am not satisfied that the endorsement in Exhibit XVI or the payment therein mentioned were really made on the 2nd April, the date of Exhibit II. I am equally unable to believe that the payment of Rs. 3,000 to Ramachendra was contemplated at the time. And I am not prepared to go so far as the Subordinate Judge in accepting the endorsement on Exhibit IX, the mortgage to Ramachendra, as stating that Rs. 3,000 was actually paid him on the 5th April. The terms of the endorsement are suspicious and it is not made by Madarsa, the head of the family, but Pakkiri and Sheik Davood, which suggests it was got up after Madarsa's death in December 1903. Madarsa was managing the business and had gone 10 miles on the 3rd April to register Exhibit II. Again nothing could be more unsatisfactory than the evidence as to how this payment came to be made. Ramachendra, Defence Witness No. 8, says the money was brought him by Periasamy, his agent, but he cannot say when. He used to keep documents such as his mortgage Exhibit IX. He cannot say when he gave it to Periasamy. Periasamy gives no explanation as to how he came to receive payment or to have Exhibit IX ready with him for endorsement. He says payment was made to him at Annamalai's house. The judgment on the earlier claim petition, where neither Periasamy nor Ramachandra was called, shows that quite a different story was then set up and probably dropped because it could have been shown to be a concoction. Exhibit X, Ramachendra's accounts, do not seem to me to prove anything. Exhibit X b is from the 1st April 1903 to the 31st March 1904 and is kept for purposes of income tax. The writer is not called and there is no evidence when the earliest entries were made and they may well have been made at a much later date than the 5th April. Taking the transaction in Exhibit II to be what it purports to be on the face of the document, so far as the recipients of the consideration are concerned, the evidence that it was anything else seems to me unsatisfactory and unreliable. I am unable to differ from the conclusion arrived at by the Subordinate Judge that it was intended by the judgment-debtors to defeat and delay their creditors.

8 The next question is, is the sale voidable against the defendant as transferee? In these cases it has been held by Jenkins C.J. and Aston J. in Amarchand v. Gokul (1903) 5 Bom. L.R. 142 that it lies on the transferee to prove good faith on his part and consideration : ' If, however, it be proved that there was a valuable consideration adequate to the occasion, the Court will be slow in ordinary circumstances to hold that there was no good faith.' Bearing this last consideration in mind, I am still unable to hold that there was good faith in Annamalai who advanced part at least of the purchase-money and acquired a preponderating interest under the mortgage, Exh. XV, in the lands conveyed by Exh. II. As regards the defendant also, I am unable, on the best consideration I can give to the case, to hold that he has shown himself to be a transferee in good faith. For reasons already given I cannot regard him as a purchaser in the ordinary course of business, and I am even constrained to question whether the real nature1 of the transaction as between him and Annamalai is before the Court. If not, this is a strong indicium of fraud. The hasty manner in which the price was fixed without any valuation of the arrears, ploughing cattle and other things he was taking over in addition to the land, and the hurried registration also indicate that he knew all the facts, and prevent me from differing from the Subordinate Judge on this point.

9 The Subordinate Judge has held that the properties conveyed by Exh. II were the exclusive property of Madarsa, but he gives no reasons for his finding. The contentions of the parties are set out in paragraphs 93 to 95 of the judgment, and the conclusion I have come to is that both the suit properties belonged to the family and not to Madarsa Rowther alone as did the business in which they were engaged. The decree which the plaintiffs were seeking to execute was only against Mahomed Rowther and Sheik Davood, but the present plaint states that the business was being carried on by them on behalf of the family, and the family were heavily indebted to the plaintiffs as well under other bonds in respect of which debts decrees have been obtained, and this is borne out by Sheik Davood's evidence, as defence witness No. 5. In these circumstances, I have come to the conclusion that Exh. II was executed by the other parties also for the purpose of defeating and delaying their creditors, including the plaintiffs, though not, of course, in respect of the pending execution on which they were not liable.

10 The next question is as to whether the defendant is entitled to a charge upon the property for the amount of Rs. 7,500 which he paid in discharge of A.nnamalai's mortgage decree. In Chidambaram Chettiar v. Sami Aiyar I.L.R. (1906) M. 6 it was held that a transfer of a decree intended to defeat and delay creditors was wholly void and that the transferee was not entitled to execute it jointly with the transferor on the ground that the consideration for the* transfer was the discharge by the transferee of some debts actually due by the transferor. In that case the transferee had merely paid off certain debts due by the transferor. Here he has discharged a valid mortgage previously binding on the property and I do not think it would be equitable to give the plaintiffs the relief they ask for except upon the terras of giving the defendant a charge for the Rs. 7,500 which he has expended in discharging the mortgage decree against the suit property, but this again must be conditional on the payment of Rs; 7,500 being certified by Annamalai if he has not already done so within one month of the receipt of this decree by the Subordinate Court. The decree of the lower Court must also admittedly be modified with regard to the defendant's purchase under Exh. VI which has, by mistake, been included in the decree. The parties will pay and receive proportionate costs throughout.

Miller, J.

11. I agree that, if it be found that the vendee assisted the vendors to convert their land into cash to enable them to keep it out of the hands of their creditors, the sale will be voidable under Section 53 of the Transfer of Property Act, and I agree also that in the present case the vendee ought to be allowed a charge on the land sold to the amount of Rs. 7,500, and as to the terms on which the charge should be allowed.

12 I have had greater difficulty in accepting the evidence as sufficient to establish a case under Section 53 of the Transfer of Property Act, but I am not prepared to dissent from my learned brother's conclusion. I therefore agree in the modification of the decree proposed by him.


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