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Ramanatha Sastrigal Vs. Alagappa Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Reported in(1956)2MLJ157
AppellantRamanatha Sastrigal
RespondentAlagappa Chettiar and ors.
Cases ReferredIn Ramaswami v. Lakshmana
Excerpt:
- - but section 53(1) says that every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. a creditor who is so defeated or delayed can treat the transfer as voidable and not binding on him. nothing is said about the defence and a mere mention in the section as to the form of a suit for the purpose would not take away the substantive right of a defeated creditor to plead the non-binding nature of a fraudulent transfer......496 of 1933 on the file of the chief court, puddukottai. he attacked the truth and validity of the suit mortgage and denied it was supported by consideration or that it was duly attested according to law or otherwise binding upon him and pointed out that the same was brought about in the following circumstances. in execution of the money decree obtained by his father in o.s. no. 496 of 1933, on 30th october, 1933 and 20th november, 1933, his father applied for attachment of the suit hypotheca and also applied to the registrar's office for encumbrance certificate, obtained it arid brought the suit properties to sale and purchased them himself. after his father's death the 2nd defendant obtained delivery of possession through court on 25th october, 1938. in the encumbrance certificate.....
Judgment:

Krishnaswami Nayudu, J.

1. The plaintiff appellant instituted the suit out of which this appeal arises as assignee of a simple mortgage dated 12th February, 1937, evidenced by Exhibit A-1 executed by the 1st defendant's deceased father in favour of the plaintiff's aunt for Rs. 300 with interest at 6 per cent, per annum and assigned over to the plaintiff by his aunt under a deed of assignment dated 19th April, 1942, Exhibit A-2. The contesting defendant is the 2nd defendant, who is a purchaser of the suit property in execution of a simple money decree obtained by his father against the 1st defendant's father in O.S. No. 496 of 1933 on the file of the Chief Court, Puddukottai. He attacked the truth and validity of the suit mortgage and denied it was supported by consideration or that it was duly attested according to law or otherwise binding upon him and pointed out that the same was brought about in the following circumstances. In execution of the money decree obtained by his father in O.S. No. 496 of 1933, on 30th October, 1933 and 20th November, 1933, his father applied for attachment of the suit hypotheca and also applied to the Registrar's office for encumbrance certificate, obtained it arid brought the suit properties to sale and purchased them himself. After his father's death the 2nd defendant obtained delivery of possession through Court on 25th October, 1938. In the encumbrance certificate obtained by his father the existence of the mortgage was not disclosed, though he claimed to have made a search up to 13th February, 1937 or 14th February, 1937. The 2nd defendant alleged that knowing that his father applied for encumbrance certificate, the 1st defendant's father, the judgment-debtor, and the plaintiff in collusion brought about the suit mortgage fraudulently, nominally and speculatively in favour of the plaintiff's aunt with a view to defraud. The trial Court found against the 2nd defendant's contention and granted a decree. In appeal, the learned Subordinate Judge of Pudukottai found that there was no proof of the proper execution and attestation of the suit mortgage deed and that therefore it could not be used in evidence and also found that the suit mortgage was a sham and fraudulent document brought into existence to defraud the 2nd defendant's father's decree debt.

2. As regards the due execution and attestation of the mortgage deed, the lower appellate Court observed that since the attestation has been specifically denied by the 2nd defendant, it was incumbent upon the plaintiff to prove execution by calling at least one attesting witness, if such a witness be alive and subject to the process of the Court and capable of giving evidence, under Section 68 of the Indian Evidence Act. The plaintiff who was examined as P.W. 2 stated that he had no knowledge of the mortgage document before its assignment under Exhibit A-2. The executant of the mortgage deed who is also the writer of the document is dead. None of the two attestors were called to prove execution of the document and they were not shown to be not alive. The Sub-Registrar who registered the document was examined as P.W. 1 who stated that he registered the suit hypothecation bond and had known Gopala Ayyar, the executant, personally.

3. Reliance was placed on the Full Bench decision in Veerappa Chettiar v. Subramania Ayyar : AIR1929Mad1 , where the mortgage bond was attested by only one witness, but, on the findings, that the Sub-Registrar who registered the document made his signature in the registration endorsement referring to the admission of execution by the executants of the document in the presence of the executants, that the identifying witnesses before the Sub-Registrar were present when such admission of execution was made by the executants and that the identifying witnesses made their signature in the presence of the executants, it was held that the signatures of the Registering Officer and the identifying witnesses affixed to the registration endorsement are a sufficient attestation within the meaning of action 59 of the Transfer of Property Act. In Surendra Bahadur v. Behari Singh (1939) 2 M.L.J. 762 , a Full Bench of the Allahabad High Court The Full Bench decision is reported in Lachman Singh v. Surendra Bahadur singh I.L.R.(1932) All. 1051 declined to accept the correctness of the Full Bench decision in Veerappa Chettiar v. Subramania Ayyar : AIR1929Mad1 .

4. The identical question came up for consideration in S.A. No. 1548 of 1950 and in my judgment in that appeal I referred to the conflict of opinion between the Madras and Allahabad High Courts. It is not, however, necessary to examine the question further, as in this case there were no identifying witnesses before the Sub-Registrar at the time of the registration, the document having been registered by the Sub-Registrar, whose endorsement is that the executant Gopala Ayyar was known to him and that therefore he dispensed with the attestation of identifying witnesses. The execution of the document not having been proved and as the execution has been denied, the view taken by the lower appellate Court that it cannot be admitted in evidence is correct.

5. On the facts, the learned Subordinate Judge examined the circumstances under which the suit document was executed and found that it was not really supported by consideration and that the object with which the mortgage was brought into existence in favour of the plaintiff's aunt was to defraud the 2nd defendant's father from realising the fruits of his decree. It may be mentioned that the plaintiff also was a creditor of the 1st defendant's father and he had obtained a decree in O.S. No. 338 of 1935 on the file of the Chief Court of Pudukottai and for payment of Rs. 250, which was said to be due under the decree the suit mortgage is purported to have been executed. I am in agreement with the reasoning and conclusion of the learned Subordinate Judge as regards the fraudulent nature of Exhibit A-1.

6. The question, however, that is raised by Mr. Gopalaswami Ayyangar is that a transfer of any immovable property made with intent to defeat and delay the creditor can be set aside only in a suit instituted by a creditor on behalf of the general body of creditors after obtaining leave under Order 1, Rule 8, Civil Procedure Code and that a transfer is fraudulent within the meaning of Section 53 of the Transfer of Property Act cannot be raised as a plea in defence as has been done in the present case. The argument is that it is not open to the 2nd defendant to raise any defence that the suit mortgage was brought into existence with a view to defraud the 2nd defendant's father, who was a creditor, and that in order to nullify the suit mortgage it would be necessary for a creditor Or a representative of a creditor to institute a suit under Section 53 on behalf of himself and the general body of creditors, if there are any, and that the contention is not therefore open to the 2nd defendant as and by way of defence.

7. Mr. Gopalaswami Ayyangar referred to the judgment of a Bench of this Court in Madina Bibi v. Ismail Durga Association : AIR1940Mad789 . The question that arose in that case was whether the creditor decree-holder was obliged to institute the suit on behalf of the general body of creditors or on his own behalf and it was held on the language of paragraph 4 of Section 53(1) of the Transfer of Property Act that the suit to avoid a transfer must be on behalf or for the benefit of all the creditors. There is nothing however in that decision to suggest that a plea based on the principle of Section 53 could not be raised by way of defence.

8. That it is open to the defendant to raise by way of defence a plea under Section 53 of the Transfer of Property Act was however the view of the Madras High Court as expressed in the decision of the Full Bench of five Judges reported in Ramaswami Chettiar v. Mallappa Reddiar : (1920)39MLJ350 , overruling the earlier Full Bench decision in Subramania Ayyar v. Muthia Chettiar : AIR1918Mad421 . That even after the amendment of Section 53 by the Amending Act of 1929, it would be open to defendant to raise by way of defence a plea under Section 53 of the Transfer of Property Act has been the view taken by the Allahabad High Court in Lallu Singh v. Chandra Sen I.L.R.(1933) All. 624 , and also by other High Courts in Hakimbu v. Dayabhai : AIR1939Bom508 , Jagat Kishore v. Kula Kamini Dassya : AIR1941Cal233 , and Purna Chandra v. Sarojendra : AIR1953Cal251 . In Ramaswami v. Lakshmana : AIR1936Mad408 , Venkataramana Rao, J., held that it was not necessary for a creditor to bring a suit to avoid a transaction by a debtor in fraud of creditors but he could do so by an unequivocal conduct disclosing that he knew of the transaction and treated it as avoided by him. That was a case which arose after the amendment but whether a defence of this nature would be barred under the language of Section 53, after the amendment was, however, not examined.

9. The argument against such a contention being raised by way of defence is based on the language of the 4th paragraph of Section 53(1), which provides that

A suit instituted by a creditor...to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of, or for the benefit of all the creditors.

But Section 53(1) says that

every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

A creditor who is so defeated or delayed can treat the transfer as voidable and not binding on him. There is nothing in the language of Section 53 expressly depriving him of the option to treat such a transaction as voidable. The option which the creditor has to exercise need not necessarily be by way of a suit but it can also be by way of defence and it is therefore open to a creditor to treat the impugned transaction as not binding on him. It is only in the case of a suit instituted by a creditor for the purpose, specific provision is made in Section 53 by providing in paragraph (4) the form of such a suit. Nothing is said about the defence and a mere mention in the section as to the form of a suit for the purpose would not take away the substantive right of a defeated creditor to plead the non-binding nature of a fraudulent transfer.

10. Further when a transaction is attacked as fraudulent, the plea of fraud has to be gone into, as no Court can ignore a document which on its finding is a fraudulent transaction brought with intent to defeat, in this case, a creditor, and refuse to examine the plea of fraud and permit it to be enforced without going into the question as to whether the plea of fraud has been substantiated or not. If the document is found to be a fraudulent one, the Court will virtually be assisting the plaintiff in enforcing such a fraudulent document and so the plaintiff in the circumstances cannot seek the aid of the Court for the purpose. The substance of the plea being fraud and the same having been raised must be allowed to be examined and if the fraud is established, the Court should refuse a decree. There is nothing in the language of Section 53 even as amended barring the defendant from raising the plea on the principle of Section 53. In either view, I am of opinion that the plea under Section 53 is open to the defendant in a suit of this nature, where the plaintiff seeks to enforce a mortgage which is attacked as a fraudulent transfer. As regards the finding of fraud, I am not persuaded to differ from the lower appellate Court, which has given cogent reasons for coming to that conclusion.

11. The result is, the appeal fails and is dismissed with costs.

12. No leave.


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