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Loorthi Odayar Vs. Gopalasami Iyer and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1924)46MLJ125
AppellantLoorthi Odayar
RespondentGopalasami Iyer and anr.
Cases Referred and Ummachakutti v. Ummerkutti Haji
Excerpt:
- - ] i am therefore not satisfied that this sum was really paid to the 1st defendant. i may remark that this case is not an authority upon section 53, because the learned judges expressly state in their judgment that the question before them was to be decided with reference to general principles of justice and good conscience, the property with which they were dealing not being immoveable property and section 53 not having therefore direct application. bijoy singh dudhuria 32 mlj 425 (pc) equally strong observations are made. 'on these authorities it is perfectly clear that the transaction before us cannot be regarded as wholly void as against the plaintiff. i therefore hold that the mortgage in favour of the 2nd defendant is good to the extent of rs......in part was for valuable consideration, was as regards the other part, only an arrangement to defeat creditors it was wholly void under section 53 of the transfer of property act. in that case, the assignment that was impeached was in favour of the creditor and the money obtained by the assignor was partially utilized for the payment of his debts. nevertheless it was held that as the arrangement was to some extent a device intended to defeat assignor's other creditors, the transaction was entirely invalid and no effect could be given to it. the reason for this decision, as 1 understand it, appears to be this. a mere preference of one creditor to another does not render the transaction voidable under section 53 of the transfer of property act. but if it is shown that the object of.....
Judgment:

Venkatasubba Rao, J.

1. The Question to be decided in this appeal is: Is the mortgage (Ex. 1) executed by the 1st defendant in favour of the 2nd defendant liable to set aside at the instance of the plaintiff under Section 53. of the Transfer of Property Act?

2. [The learned Judge then discusses the evidence and comes to the conclusion that the 1st defendant executed the mortgage with the intention of defrauding the plaintiff and that the 2nd defendant was aware of that intention.]

3. The consideration for the mortgage deed is said to consist of

(1) Rs. 7,037-12-10 which is the aggregate amount of the debts due by the 1st defendant to third parties and which the 2nd defendant claims to have discharged. [The evidence as regards this item is discussed and the conclusion reached that the consideration to this extent did really pass for the mortgage document.]

(2) Rs. 1,873-8-0 said to be the amount which was due by the 1st defendant to the 2nd defendant on a promissory note of a prior date, namely, 20th May 1913.

4. [After discussing the evidence on the point, the judgment continues.]

5. The mortgage document having been executed in circumstances which show that the object of the . transaction was to defeat the plaintiff, the onus was heavily upon the 2nd defendant to prove the existence of the debts alleged to have been discharged from and out of the consideration for the mortgage. in Palamalai Mudaliar v. The South Indian Export Company 20 MLJ 211, Wallis, J., (as he then was) states the law thus: '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 and should be established by satisfactory evidence. ' This principle was also accepted by Mitra and Caspersz, JJ., in Rajani Kumar Dass v. Gaur Kishore Shaha ILR(1905) S 1051 . I have come to the conclusion that there was no debt due by the 1st defendant to the 2nd defendant previous to Ex. I and that the recital in it to the contrary is false.

5. (3) Rs. 1,088-11-2 is alleged to have been paid by the 2nd defendant to the 1st defendant at the time of the registration of the document. [The learned Judge discussed the evidence and concludes.] I am therefore not satisfied that this sum was really paid to the 1st defendant. Even assuming that it was paid, I have not the least doubt that the object of the payment was to defraud the 1st defendant's creditors, because, as pointed out in Palamalai Mudaliar v. The South Indian Export Company 20 MLJ 211 converting immoveable property into cash is the most obvious and effective method of defeating and delaying creditors.

6. Having thus found on facts, 1 must now consider what the law on the subject is. In Chidambaram Chettiar v. Sami Iyer 16 MLJ 427 it was held that where a transfer, though in part was for valuable consideration, was as regards the other part, only an arrangement to defeat creditors it was wholly void under Section 53 of the Transfer of Property Act. In that case, the assignment that was impeached was in favour of the creditor and the money obtained by the assignor was partially utilized for the payment of his debts. Nevertheless it was held that as the arrangement was to some extent a device intended to defeat assignor's other creditors, the transaction was entirely invalid and no effect could be given to it. The reason for this decision, as 1 understand it, appears to be this. A mere preference of one creditor to another does not render the transaction voidable under Section 53 of the Transfer of Property Act. But if it is shown that the object of the transaction is not merely to prefer a creditor but in addition is to defeat or to delay the other creditors, it then ceases to be a transaction by which merely a creditor is preferred but becomes a transaction to which Section 53 is directly applicable. The next step in the argument seems to be that the inclusion of a fictitious debt furnishes evidence of an intention to defeat the creditors and the transaction is thus wholly void against them. I may remark that this case is not an authority upon Section 53, because the learned judges expressly state in their judgment that the question before them was to be decided with reference to general principles of justice and good conscience, the property with which they were dealing not being immoveable property and Section 53 not having therefore direct application. Apart altogether from this, the recent decisions of the Judicial Committee, Musahar Sahu v. Lala Hakim ILR (1916) C 521 and Minakumari Bibi v. Bijoy Singh Dudhuria 32 MLJ 425 (PC) place the matter beyond doubt. In the former at page 525, an extract is given from the judgment of Palles C. B. In In re Moroney where it is stated that although the effect of the transaction or even the interest of the debtor in making it may be to defeat another creditor, it is not a fraud within the Statute. Their Lordships towards the close of their judgment say that a preference of one creditor to another is no ground for impeaching the deed even if the debtor was intending to defeat an anticipated execution by another creditor. In the latter case Minakumari Bibi v. Bijoy Singh Dudhuria 32 MLJ 425 (PC) equally strong observations are made. Their Lordships say at page 671 ' It may be that the judgment debtor preferred the plaintiff... and that he did this of set purpose, yet this would not stamp the transaction as a fraudulent transfer. ' On these authorities it is perfectly clear that the transaction before us cannot be regarded as wholly void as against the plaintiff.

7. I may add that in Palamala Mudaliar v. South Indian Export Company 20 MLJ 211, Rajani Kumar Das v. Gaur Kishore Shaha ILR (1905) C 1051, and Ummachakutti v. Ummerkutti Haji (1915) 29 IL 583, the transactions were not held to be wholly invalid and effect was given to the deeds to the extent to which the consideration was applied for the discharge of the transferor's debts. I therefore hold that the mortgage in favour of the 2nd defendant is good to the extent of Rs. 7,037-12-10 and that the property is liable to be sold subject to this right of the 2nd defendant. The appeal will be allowed to that extent. The parties will pay and receive proportionate costs throughout.

Phillips, J.

8. I agree.


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