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N.M. Muthuvasu Chettiar Vs. Velumuruga Nadar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1939)2MLJ362
AppellantN.M. Muthuvasu Chettiar
RespondentVelumuruga Nadar and ors.
Cases Referred and Mina Kumari Bibi v. Bijoy Singh Dudhuria
Excerpt:
- - it is well established law that if a transaction offends section 53 of the transfer of property act, it cannot ordinarily be upheld even to the extent to which it may be found to be supported by consideration; where a person lends money for the first time under a mortgage like the present, it will not be possible to regard it as a case of preference, merely because that money is utilised by the transferor to pay off some of his simple debts......of the lower court. the real contesting defendants were defendants 6 and 7 who had obtained a money decree against the first defendant in o.s. no. 43 of 1929 and had attached the properties hypothecated under ex. a in execution of their money decree. as attachment was effected only in 1933, the claim under ex. a would have had precedence, if the mortgage was otherwise valid. defendants 6 and 7 contended that ex. a only evidenced a nominal transaction and that, in any event, it had been executed to defraud the sixth defendant and other creditors of the first defendant.2. on the contention of defendants 6 and 7, the third issue in the case was raised. the learned subordinate judge was of opinion that exs. a and i had been brought into existence in pursuance of a common object to help.....
Judgment:

Varadachariar, J.

1. This appeal arises out of a suit for the recovery of money due under a mortgage bond, Ex. A, executed on 5th October, 1929, by the first defendant and the second defendant in favour of the plaintiff. Defendants 1 to 4 are members of a joint Hindu family, the first defendant being the father and defendants 2 to 4 his sons. The fifth defendant was impleaded, as a document Ex. I had been executed by the first defendant in his favour on 7th October, 1929, and according to its tenor it purported to be a puisne mortgage. But the fifth defendant admitted that it was a nominal transaction and he has accordingly taken no part in the suit except that he was examined as D.W. 1 and has deposed not merely to the fact that Ex. I was a nominal transaction but also to a conversation that took place between himself and the first defendant about the time when Exs. A and I were thought of. The first defendant raised some objections in respect of certain portions of the amounts claimed by the plaintiff to be due. But, on these points, he has acquiesced in the finding of the lower Court. The real contesting defendants were defendants 6 and 7 who had obtained a money decree against the first defendant in O.S. No. 43 of 1929 and had attached the properties hypothecated under Ex. A in execution of their money decree. As attachment was effected only in 1933, the claim under Ex. A would have had precedence, if the mortgage was otherwise valid. Defendants 6 and 7 contended that Ex. A only evidenced a nominal transaction and that, in any event, it had been executed to defraud the sixth defendant and other creditors of the first defendant.

2. On the contention of defendants 6 and 7, the third issue in the case was raised. The learned Subordinate Judge was of opinion that Exs. A and I had been brought into existence in pursuance of a common object to help the first defendant as against his creditors including the sixth defendant, and that Ex. A was not supported by consideration even in respect of the two amounts of Rs. 1,600 said to be due from the first defendant to the plaintiff and of Rs. 2,300 said to have been advanced by the plaintiff to the first defendant contemporaneously with Ex. A. He felt no doubt that Ex. A had been brought into existence to be used as a shield against the sixth defendant in respect of the money claim he had against the first defendant and in respect of which the suit O.S. No. 43 of 1929 was instituted within a month after the date of Ex. A. In the result he gave a mortgage decree against defendants 1 to 4 for the sums that he found to have been actually advanced by him and declared the plaintiff's right under Ex. A to be subject not merely to the pre-existing mortgage under Ex. II in favour of the seventh defendant but also to the rights of defendants 6 and 7 under the attachment made by them in execution of the decree in O.S. No. 43 of 1929. It is against this part of the decree which makes the plaintiff's rights subject even to the attachment in O.S. No. 43 of 1929 that this appeal has been preferred by the plaintiff.

3. His Lordship then discussed the evidence and concluded.

4. In the light of these circumstances, the inference drawn by the lower Court seems to us to be the only reasonable inference, that Ex. A must be held to have represented only a nominal transaction. But it is sufficient for the purposes of this case even if it is held to be a transaction operative between the parties but voidable as against the creditors under Section 53 of the Transfer of Property Act.

5. Even in the view that the transaction was voidable under Section 53 of the Transfer of Property Act, Mr. Raghava Rao contended that to the extent to which Ex. A was shown to have been supported by consideration, the plaintiff was entitled to a mortgage decree not merely against defendants 1 to 4 but even against sixth and seventh defendants. As we have already stated that the item of Rs. 1,600 referred to in the mortgage bond does not represent a real debt, this argument will be of no avail to the plaintiff in respect of that sum. It will arise only in respect of the sum of Rs. 2,300 which the learned Judge has found must have been drawn by the first defendant some months after the date of Ex. A and utilised in paying off some of his debts. It is well established law that if a transaction offends Section 53 of the Transfer of Property Act, it cannot ordinarily be upheld even to the extent to which it may be found to be supported by consideration; because, whatever may be the importance of the question of consideration, when dealing with the question of fact, namely, whether the transaction was one that offended Section 53 or not, it has little bearing once the conclusion is reached that the transaction does offend Section 53. An exception has however been made in the transferee's favour in cases in which any part of the consideration for the document has been applied in the discharge of pre-existing secured debts, and it has been held that the transferee might in such cases be entitled to the benefit of the doctrine of subrogation. A distinction has also been suggested between sales and mortgages and it has been held that whereas a sale might have to be wholly set aside if it offends Section 53, a mortgage might be upheld as a valid security to the extent of the debt actually due on the date of the mortgage. This distinction has been based on the ground that to that extent the transaction would merely amount to a preference and as such would not fall under Section 53 of the Transfer of Property Act. This we understand is the basis of the decision in China Pitchiah v. Pedakotiah I.L.R.(1911) 36 Mad. 29. But no case has gone the length of holding that even when there was no pre-existing debt, the mere fact that some consideration passed under a mortgage which on the evidence has been held to be in fraud of creditors will justify the view that the mortgage can be held to constitute a valid security to the extent of the contemporaneous advance. Reliance was however placed by Mr. Raghava Rao in this connection on certain observations in Loorthi Odayar v. Gopalasami Aiyar (1923) 46 M.L.J. 125. Some of the observations there seem to be widely expressed but the contrast which the learned Judges emphasise between the decision in Chidambaram Chettiar v. Sami Aiyar : (1906)16MLJ427 , which was affirmed by the Privy Council in Chidambaram Chettiar v. Srinivasa Sastrigal (1914) 26 M.L.J. 473 : I.L.R. 37 Mad. 227 and the decisions in Musabur Sahu v. Lala Hakim Lal (1915) 30 M.L.J. 116 : L.R. 43 IndAp 104 : I.L.R. 43 Cal. 521 and Mina Kumari Bibi v. Bijoy Singh Dudhuria (1916) 32 M.L.J. 425 : L.R. 44 IndAp 72 : I.L.R. 44 Cal. 662 , makes it clear that they had in mind the distinction between a transaction in fraud of creditors and a transaction only amounting to a preference. If the learned Judges intended to lay down the law in the sense now contended for by Mr. Raghava Rao, we venture to think, with all respect, that it would be difficult to reconcile the decision with the weight of authority. Where a person lends money for the first time under a mortgage like the present, it will not be possible to regard it as a case of preference, merely because that money is utilised by the transferor to pay off some of his simple debts. We may add that on the facts we have above stated, the sum of Rs. 2,300 can scarcely be regarded as even amounting to a contemporaneous advance. It was in our opinion only money which the plaintiff held for the benefit of the defendants and to that extent it was a secret advantage for the debtors' benefit. The fact that subsequent to the institution of O.S. No. 43 of 1929 by defendants 6 and 7, the first defendant drew some moneys from the plaintiff and utilised the same to pay off some of his creditors cannot in our opinion improve the plaintiff's position in respect of Ex. A.

6. The appeal fails and is dismissed with costs of respondents 6 and 7.


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