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Alamelu Achi Vs. Meenakshi Achi and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 1147 of 1959
Judge
Reported inAIR1960Mad536
ActsTransfer of Property Act, 1950 - Sections 53; Law of Property Act, 1925 - Sections 172 and 173; Provincial Insolvency Act; Indian Trusts Act
AppellantAlamelu Achi
RespondentMeenakshi Achi and ors.
Cases Referred and Mt. Bibo v. Sampuran Singh
Excerpt:
- - under both the systems of law a transfer was bad if made to defraud creditors......of property act, 1925 (15 geo. v. chap. 20).(5) the american law follows the english law. the uniform fraudulent conveyances act was approved by the national conference of commissioners in uniform state laws. it has been adopted in a considerable number of states. the law is in the main declaratory and a restatement of the statute of 13 elizabeth. (see 24 american jurisprudence fraudulent conveyances, p. 165).the law has been summed up in 37 corpus juris secundum (fraudulent conveyances) as follows: any transaction for the conveyance of property may be vitiated for fraud. the precise form which a fraudulent alienation may assume is immaterial. courts will look beyond mere form to the substance of the transaction. what cannot be done directly, cannot be done by indirection. forms are of.....
Judgment:

(1) This is a second appeal sought to be preferred against the decree and judgment of the learned Subordinate Judge of Devakottai in A. S. No. 46 of 1958 confirming the decree and judgment of the learned District Munsif of Devakottai in O. S. No. 144 of 1957. The facts of the case have been fully set out in the judgments of the courts below and need not be reset here.

(2) On relevant and acceptable evidence both the Courts below came to the conclusion that the settlement in question was a pre-nuptial settlement of gift and that it was brought into existence by collusion of the parties thereto to defeat and, defraud the creditors of the heavily indebted settlors' family and that the transaction was not at all a bona fide one. The lower Court also approached the case from the standpoint whether the defendants have satisfactorily established that the transaction was not bona fide but brought into existence to defeat and delay the creditors of the settlor and came to the conclusion that the defendants have affirmatively established their case. I am bound by these findings of fact.

(3) It is settled law that a settlement made before and in consideration of marriage s protected but where there is an intent in the minds of both parties to the marriage to defeat and delay creditors and to make the celebration of marriage part of a scheme to protect property against the rights of creditors, the settlement will be voidable: Colombine v. Penhall, (1853) 1 Sm. & G. 228.

(4) The law is the same in India, England and the United States of America. So far as India is concerned, the Hindu and Mohammadan Laws were not inconsistent with the provisions of section 53 of the Transfer of Property Act. Under both the systems of law a transfer was bad if made to defraud creditors. (See AIR commentaries on the Transfer of Property Act, 3rd (1950) Edn. page 759). Section 53 of the Transfer of Property Act embodies the principles of 13 Eliz (I). Chap. 52 and 27 Eliz (I), Chap. 43, and thus codified has been recognised as the law in this country. In England these Elizabethan Statues were re-nacted by sections 172 and 173 of the Law of Property Act, 1925 (15 Geo. v. Chap. 20).

(5) The American law follows the English law. The Uniform Fraudulent Conveyances Act was approved by the National Conference of Commissioners in Uniform State Laws. It has been adopted in a considerable number of States. The law is in the main declaratory and a restatement of the Statute of 13 Elizabeth. (See 24 American Jurisprudence Fraudulent Conveyances, p. 165).

The law has been summed up in 37 Corpus Juris Secundum (Fraudulent conveyances) as follows: Any transaction for the conveyance of property may be vitiated for fraud. The precise form which a fraudulent alienation may assume is immaterial. Courts will look beyond mere form to the substance of the transaction. What cannot be done directly, cannot be done by indirection. Forms are of little moment, for, where fraud appears, Courts will drive through all matters of form and expose, and punish the corrupt act. Whatever may be the external formality of the deed, if its design is to defraud creditors it is invalid. (P. 334-335; see also 27 Corpus Juris p. 449 note 25).

(6) Thus, a conveyance or transfer of property in fraud of creditors may take the form of an absolute sale and conveyance or transfer of real or personal property, even though a valuable consideration is paid, and even though the instrument of conveyance is duly acknowledged and recorded. It may take the form of an assignment or transfer of a note, life insurance policy, patent right, or other chose in action; or of a legacy. It may take the form of a bond and mortgage; a deed of trust, mortgage, or pledge; an alleged trust by parol agreement; a voluntary conveyance or transfer; an ante-nuptial or post nuptial settlement by a husband on his wife, directly or through a third person, or to trustees for her benefit; a transfer of an option; a fraudulent judgment, by confession or in legal proceedings, and a sale on execution thereon; a fraudulent foreclosure of a real estate or chattel, mortgage; a fraudulent attachment; a tax sale, or deed; a release or cancellation of a debt or claim; a fraudulent organization of a corporation and the transfer of property to it; a release or transfer of future income from the rents and profits of property consisting the rest of a trust by an attempted termination of the trust; or other form of transfer. Secret liens and reservations of title are fraudulent against creditors. (p. 286 of 37 Corpus Juris Secundum).

(7) In the absence of a Statute to the contrary, marriage is in contemplation of law a consideration of the highest value and is therefore sufficient to support an ante-nuptial conveyance or settlement of property. But it has been indicated, however, that a marriage settlement grossly out of proportion to the husband's station and circumstances is fraudulent, and it has been held that the fact that the conveyance transferring all of the property of the grantor is sufficient to charge the grantee with notice of fraud.

(8) To cite by way of summing up: In Matthews v. Montgomery, 7 SE 2d. S. 41 : 193 SC 118, it has been held that fraudulent purpose and injurious result, and not form of transaction or illegality or irregularity of instrument or means used for its accomplishment, render such transactions voidable at instance of person injured thereby.

Gardner v. Coker, 192 SE 151 : 184 SC 190: The Court will not sanction the debtor's donation of his property to others by any device whereby the payment of the previously contracted undisputed and adjudicated debt to another will be evaded.

Leifer v. Murphy, 267 N. Y. S. 701 : 149 Misc. 455: Equity, in action to set aside fraudulent conveyance, will not be frustrated by circuitous devices to defraud.

The same principles will be found set out in Sharfuniya Begum v. Pacha Sahib : AIR1928Mad793 , Palaniappa Chettiar v. Kuttayan Chettiar : (1937)2MLJ865 , Mahomed Ishaq v. Md. Yusuf, AIR 1927 Lah 420 and Mt. Bibo v. Sampuran Singh, AIR 1936 Lah 222. (See K. Krishnamurti and E. Mathrubhutham's Provincial Insolvency Act (M L J) publication p. 485--Settlement in consideration of mortgage and Indian Trusts Act Second Edn. (M. L. J Publication) p. 577.

(9) There are no merits in this Second Appeal and it is dismissed.

(10) Appeal dismissed.


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