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The Official Receiver of South Arcot Vs. K.V.M.P.Kt. Alagappa Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported inAIR1946Mad236; (1946)1MLJ113
AppellantThe Official Receiver of South Arcot
RespondentK.V.M.P.Kt. Alagappa Chettiar and ors.
Cases Referred(Vide Rahimbhoy Habibhoy v. Charles Agnew Turner
Excerpt:
- - srinivasa aiyangar, the learned advocate for the appellant, attempted to argue that there could be no question of limitation at all to a suit like the present from the standpoint of the first of his alternative prayers, namely, for a declaration that the deed was sham and nominal. he cited the well-known ruling of the privy council in pethaperumal chetti v. every transfer of immoveable property made with intent to defeat and delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. nothing in this sub-section shall impair the rights of a transferee in good faith and tor cons ation. 7. without referring to any of the authorities and looking at the plain language of the section and the language of the third column of article 120 it.....rajamannar, j.1. this is an appeal by the official receiver of south arcot from the decree and judgment of the subordinate judge of cuddalore dismissing the suit instituted by him for a declaration that the deed of mortgage executed by the insolvent one kadiresan chettiar in favour of defendants 5 to 8 on 29th january, 1932, in respect of properties mentioned in the plaint schedule is a sham and nominal transaction, or, in the alternative, for a declaration that the said deed of mortgage is not binding on the plaintiff or any of the creditors under section 53 of the transfer of property act. defendants 1 to 3 are the sons of kadiresan chettiar who died in march, 1940, before the institution of the suit. defendant 4 is a creditor of the insolvent who claims to have purchased the interests.....
Judgment:

Rajamannar, J.

1. This is an appeal by the Official Receiver of South Arcot from the decree and judgment of the Subordinate Judge of Cuddalore dismissing the suit instituted by him for a declaration that the deed of mortgage executed by the insolvent one Kadiresan Chettiar in favour of defendants 5 to 8 on 29th January, 1932, in respect of properties mentioned in the plaint schedule is a sham and nominal transaction, or, in the alternative, for a declaration that the said deed of mortgage is not binding on the plaintiff or any of the creditors under Section 53 of the Transfer of Property Act. Defendants 1 to 3 are the sons of Kadiresan Chettiar who died in March, 1940, before the institution of the suit. Defendant 4 is a creditor of the insolvent who claims to have purchased the interests of the sons in item 1 of the plaint schedule. Defendant 9 is a subsequent purchaser from the fourth defendant. Defendant 10 is the Official Receiver of Pudukottah, made a party because of an insolvency petition filed against the same Kadiresan Chettiar in the Chief Court, Pudukottah. The suit has been dismissed on the preliminary point of limitation and oral and documentary evidence was confined to the issue of limitation.

2. The mortgage in question was for a sum of Rs. 52,101-1-7 and this sum was alleged to be the total amount of debts due by the insolvent to the four mortgagees severally. This sum was secured on the residential house of the insolvent in Kottaiyur of considerable value and a small piece of land at Chidambaram apparently added to enable the deed of mortgage to be registered at Chidambaram. The mortgagees were closely related to the insolvent. The fifth defendant was the father-in-law of one of his sons (defendant 2). The sixth defendant was the elder sister and the seventh defendant was the daughter of the sixth defendant. The eighth defendant was the elder brother of the insolvent in the family in which he was born (he had been adopted). Kadiresan Chettiar appears to have been in involved circumstances at about this time. Soon after this deed, one K.M.C. Chinnayya Servai filed a petition, I.P. No. 8 of 1932, on 20th June, 1932, in the Court of the Subordinate Judge of Devakottah to adjudge Kadiresan Chettiar as an insolvent and among the acts of insolvency alleged to have been committed, the mortgage in question was one. It was alleged that' the said document is a sham and nominal transaction and in any event a fraudulent preference intended to defeat and delay the petitioner and other creditors.' This petition was, however, dismissed on 9th April, 1934. Another petition by one Muthukaruppan Chettiar (I.P. No; 20 of 1932, Sub-Court, Devakottah) to adjudicate Kadiresan Ghettiar an insolvent shared the same fate by its dismissal on 24th January, 1933.

3. On 8th July, 1935, Kadiresan Ghettiar himself filed a petition in the Court of the Subordinate Judge of Cuddalore to be adjudged an insolvent and on 14th July, 1936, an order of adjudication was passed. It appears however, that the Official Receiver had been appointed an interim receiver even on the 17th July, 1935. There was a change in the personnel of the Official Receiver and the present appellant took charge on 5th September, 1938. There was a public examination of the insolvent in 1939. On 18th October, 1940, the Official Receiver prayed for sanction to file a petition under Section 4 of the Provincial Insolvency Act impeaching the mortgage. But the Subordinate Judge refused to accord sanction mainly on the ground that the matter was too complicated. It is unfortunate that the Subordinate Judge refused sanction as we consider that it was proper for him to have enquired into the matter and if such an enquiry had been made at that stage, this litigation could have been avoided. After this order, one of the creditors, Muthukaruppan Chettiar, attempted to induce the Official Receiver to file a suit. But naturally the Official Receiver was unwilling to file a suit after the above order of the learned Subordinate Judge. Sanction was, however, accorded to the creditor himself to file a suit at his own risk. But subsequently on the creditor undertaking to finance the litigation, sanction was accorded to the Official Receiver himself to institute the present suit.

4. The suit was filed on the 24th February, 1943 and defendants 5 to 8, that is, the mortgagees, contend that the suit is barred by limitation. The first question that arises for decision is, what is the article applicable to the suit? Mr. V.V. Srinivasa Aiyangar, the learned advocate for the appellant, attempted to argue that there could be no question of limitation at all to a suit like the present from the standpoint of the first of his alternative prayers, namely, for a declaration that the deed was sham and nominal. He stressed the distinction between a fraudulent and fictitious transfer and contended that it was unnecessary to set aside a sham document, that it could be ignored and relief obtained so long as the right of the real owner was not extinguished by the operation of the provisions of Section 28 of the Limitation Act. He cited the well-known ruling of the Privy Council in Pethaperumal Chetti v. Muniandi Servai (1908) 18 M.L.J. 277 : 35 I.A. 98 : 35 Cal. 551 and other decisions. We consider that there is no substance in this connection. No doubt, it was held in Pethaperumal Chetti v. Muniandi, Servai (1908) 18 M.L.J. 277 : 35 I.A. 98 : 35 Cal. 551 that if a document was sham and colourable, it could be ignored and did not need to be set aside under Article 91 of the Limitation Act and a suit for possession would be governed by Article 144 of the Limitation Act. In the present case there is no question of the plaintiff praying for possession. The suit is for a declaration and the only article applicable to a suit for a declaration is Article 120.

5. The alternative claim in the plaint, which we consider is really the substantial claim, is under Section 53 of the Transfer of Property Act. It was not seriously disputed by either side that to a suit under that section the proper article applicable is Article 120. As that section does not affect the validity of the transaction as between the parties to it but confers only a right on the creditors to avoid it, Article 91 has been held not to apply and the residuary article has, therefore, been applied; at any rate consistently in this Court (Vide Pachamuthu v. Chinnappan I.L.R. (1887)Mad. 213 Marasimham v. Mar ay ana Rao (1925) 22 L.W. 592 Venkateswara Iyer v. Somasundara Chettiar (1917) 7 L.W. 280).

6. The more difficult question, however, is when does time begin to run? According to the third column of Article 120, it is ' when the right to sue accrues'. When does the right to institute a suit under that section accrue to a creditor or, in the present case to the Official Receiver? Section 53 of the Transfer of Property Act as amended by Act XX of 1929, runs as follows:

Every transfer of immoveable property made with intent to defeat and delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing in this sub-section shall impair the rights of a transferee in good faith and tor cons ation.

7. Without referring to any of the authorities and looking at the plain language of the section and the language of the third column of Article 120 it appeals to hold that the right to sue accrues to a creditor when he is defeated or delayeo, i.e., when his right to have the particular property covered by the transfer available to satisfy his debt is denied or infringed. This ordinarily would be on the date of the alienation itself. However the preponderance of authority is against taking the date of alienation as the starting point of limitation. This is not because of the language of the statute of limitation but because of several other considerations. One such consideration is that the term ' creditor ' in Section 53 includes not only creditors at the time of the transfer but also those who subsequently become creditors (vide Thomas Pillai v. Muthuraman Chettiar (1909) 19 M.L.J. 747 :I.L.R. 33 Mad. 205. Another possible consideration is that transfers of this class are ostensibly valid and it may be only on discovery of facts not appearing ex facie that the real nature of the transaction may become evident. That is why we find learned Judges giving a rather wide interpretation to the language of the statute.

8. The general consensus of opinion among Judges with the exception of one learned Judge appears to be to hold that ' knowledge ' is a factor which should determine the starting point of limitation for a suit under Section 53 of the Transter of Property Act. Venkatasubba Rao, J., alone was of opinion that the starting point of limitation was the date when the plaintiff exercised his option to avoid me transfer (vide Mrasimham v. Narayana Rao (1925) 22 L.W. 592). That was a Letters Patent Appeal against the decision of Krishnan, J., in second Appeal. Venkatasubba Kao, J., thought that his view was the view that Krishnan, J., intended to hold, but we are unable to agree. Madhavan Nair, J., differed from Venkatasubba Rao J., on this point. We are clearly of opinion that the date of the exercise of the option cannot be regarded as the starting point of limitation for a suit under Section 53 of the Transfer of Property Act. The fact that the exercise of such option can be by me institution of the suit itself shows that this could not be the starting point. with great respect to the learned Judge we consider that he erred in thinking that me option mentioned in Section 53 could be exercised at any time and that it was me exercise of his option that gave him a right to sue. What gives him a right to sue is the fact that the transfer was made with intent to defeat or delay the creditors., What the section says is that such a transfer is not ipso facto void but voidable if any creditor desires to avoid it. A person may have a right but may not choose; to enforce it. But when he enforces it, time should commence to run from me time when he could first have enforced that right and not from the time when he first decides to enforce that right. No authority has been cited before us to support the view of Venkatasubba Rao, J.

9. That leaves us with the view for which there is abundant authority and which, it may be said, has been in a way approved by the Judicial Committee, namely, that time begins to run from the knowledge of the fraudulent nature of the transfer. This is the view of Madhavan Nair, J., in Narasimham v. Narayana Rao (1925) 22 L.W. 592 referred to above and the view taken in Lal singh v. Jaichand I.L.R. (1930) Lah. 262 Venkateswara Aiyar v. Somasundara Chettiar (1917) 7 L.W. 280 : (1918) M.W.N. 244 I.L.R. 1941 Mad. 175 and Chinnaturai Muthiriah v. Official Receiver, Tnchmopoly : AIR1943Mad252

10. In O.R.M.O.M. SP. Firm v. Nagappa Chettiar (1941) 1 M.L.J. 393 : L.R. 67 IndAp 448 the question was as to the article of the Limitation Act applicable to a suit to recover trust property Irom a person who had taken it with notice of the trust by a transaction which was a breach of trust and it was held that Article 120 applied to such a suit. The question then arose, from what date time began to run? In that case the breach of trust consisted in the appropriation of trust moneys held by a banker with notice of the trust towards the discharge of an overdraft of the trustee in his personal capacity. This appropriation was on 10th February, 1920. The suit was filed on 29th April, 1933, by two brothers of the trustee, who had committed the breach of trust, challenging this transaction. It was alleged in the plaint that the plaintiffs came to know of the breach of trust sometime in 1929. After holding that the article applicable is Article 120, their Lordships of the Judicial Committee proceed to say as follows:

The question is whether time began to run from 10 th February, 1920 or from the date in 1929, when the plaintiff, came to know that the money of the charities was set off against Subramaniam's debt to the appellant bank upon his overdraft. The suit having been brought in 1933 it is necessary for the plaintiff to be able to calculate the time from the later date. The language of Article 120 makes no reference to the knowledge of the plaintiff and is in this respect in contrast with that of other articles e.g., 90, 91, 92, 95, 96, 114. On the other hand it was recognised by the Board in Mt. Boh v. Mt. Koklan (1930) 59 M.L.J. 621 : L.R. 57 LA. 325 : I.L.R. 11 Lah. 657 that an infringement of the plaintiff's right or at last a clear and unequivocal threat to infringe it is necessary before time begins to run against the plaintiff under the article. The Appellate Bench acted upon a principle which has been accepted as applicable to this article in a number of cases in several of the High Courts, Venkateswara Iyer v. Somasundaram Chettiar (1917) 7 L.W. 280 P. Visva-natham v. P. Narayanadas : AIR1928Mad837 Lalsingh v. Javkand I.L.R. (1930)Lah. 262 MathuraSingh v. Ramarudra PrasadSinha I.L.R. (1935)Pat. 824 and Basavayya v. Bapannamo : (1930)58MLJ349 . In the last mentioned case it was said that in cases in which the relief is sought on the ground of fraud, misconduct, mistake etc., it would appear that limitation is made to commence from the time when the fraud, misconduct or mistake becomes known to the paintiff. Such articles as 90, 91, 92, 95 and 96 were mentioned by way of illustration of this principle and it was considered that Article 120 being an omnibus one the general expression employed in column 3 is necessitated by the variety of suits coming within its purview in some only of which would fraud, misconduct or mistake be part of the cause of action. It was accordingly held that it would be in consonance with the scheme of the Act if the right to sue should be deemed to accrue under Article 120 from the time of the plaintiff's knowledge of the fraud, misconduct or mistake, where such a ground was the basis of the suit. Their Lordships can see some difficulties in this reasoning as a matter of interpretation of the language of the statute and had the matter been res integra they are not certain that this interpretation would have prevailed with them. But the decisions in India have established a rule of limitation under Article 120 by which the plaintiff in the cases to which the rule applies cannot be debarred of his remedy unless with knowledge of his rights he has been guilty of delay. The decisions which have been referred to were given in cases where the plaintiff sought to set aside a decree passed against him when a minor owing to the negligence of his guardian, or a mortgage of property, which belonged not to the mortgagor but to a temple, or a transfer by a debtor to defeat his creditors.

11. It is important to note that a suit by a creditor to set aside a transfer by a debtor intended to defeat his creditors is also specifically referred to as a suit coming within the scope of the rule.

12. So far, the matter is fairly free from difficulty. But then, several questions arise. What is the nature and extent of the knowledge that will start the running of time? In a case like the present filed by the Official Receiver, is it the knowledge of the Official Receiver that is relevant, or, is it the knowledge of the creditors? If it is the knowledge of the creditors, does time begin to run from the earliest date on which any of the creditors had knowledge or from the date on which the last of the creditors had the knowledge?

13. It has now been established that the Official Receiver can file a suit under Section 53 of the Transfer of Property Act. It can also be taken as established that the inaction of one creditor who might have knowledge of the fraudulent nature of the transaction would not itself bar another creditor who subsequently came to know of it. In Lalsingh v. Jaichand I.L.R. (1930)Lah. 262 it was held that the inaction of one creditor could not bar the general body of creditors and that the right under Section 53 of the Transfer of Property Act was an individual right though when it was exercised it enured for the benefit of the general body of creditors. The ruling in Muruga Chetti v. Rajaswami (1915) 29 M.L.J. 574 supplies a similar principle. At page 822 the learned Judges say with reference to a suit filed by certain representatives of a community for a declaration that the suit properties were trust properties and that the alienation of the same was not valid and binding on the community, as follows:

Following Tirumal Rao v. Tungamma Shettithi (1914) 1 L.W. 134 to which one of us was a party we hold that the cause of action for a declaratory suit based on a denial of title does not arise until the plaintiff has knowledge of the denial. Mr. T.R. Rarriachandra Aiyar argues, however, that some of the members of the community had knowledge at the date of the sale deed as they were parties to it. In our opinion the knowledge of some of the members cannot affect the right cff the others.

14. The learned Judges in Narasimham v. Narayana Rao (1925) 22 L.W. 592 also took the same view. Ven-katasubba Rao, J., says at page 601 the following:

An individual right is conferred upon each creditor by this section and the inaction or laches of one cannot deprive others of their rights.

Madhavan Nair, J.

15. Says at page 606:

In view of the fact that a few of the creditors in this case knew of the fraudulent character of the alienation in 1909, i.e., more than six years before the suit, it becomes necessary to consider whether the creditors' right of suit under Section 53 is an individual right which each individual creditor has or whether it is only a representative right in the sense that if one creditor is barred by limitation from bringing the suit, the others are also barred. I agree with my learned brother in thinking that the right of suit under Section 53 is an individual right which each creditor has. It is true that if a creditor obtains a decree in a suit under Section 53, that decree accrues to the benefit of the other creditors as well, but I think Section 53 confers on each of the creditors the right of bringing a suit on his own behalf. As the receiver represents the whole body of the creditors and as some at least of the creditors knew that the suit mortgage deed was a collusive do'cument only within six years of the suit, I hold the suit by the receiver is not barred by limitation.

16. No doubt this decision was before the Amendment of 1929. But we consider that the amendment does not affect the question. In short, while the action of any one of the creditors may bind the other creditors, his inaction will not adversely affect the others. We are also inclined to be of opinion that in a case where the plaintiff is an officer of Court like the Official Receiver, though he no doubt represents the body of creditors, it is his knowledge that should be taken into consideration rather than the knowledge of this or that creditor which might or might not have reached the Official Receiver. No doubt, a change of the office-holder should be disregarded for this purpose and the plaintiff should be considered to be the Official Receiver as such.

17. Then remains the point which has given us some difficulty and on which counsel on either side have been unable to cite any direct decision, viz., the nature and extent of the knowledge. But we consider it useful to refer to cases under Articles 91 and 95 as cases falling under the same category and governed by the same principle. The principle is, that in cases governed by specific articles like 90, 91, 92, 95, etc., as well as incases which may fall within the residuary Article 120, but resemble them, the facts and circumstances which vitiate a transaction or render it voidable are not apparent on the surface of the document evidencing the transaction. Other facts and circumstances not so appearing have to be discovered or come to light before the truth is apprehended. These are all cases in which what is apparent is not the real. Phillips, J., dealing with a suit under Section 53 of. the Transfer of Property Act, says in Venkateswara Iyer v. Somasundaram Chettiar (1917) 7 L.W. 280 at p. 283.

If such a suit coming within Article 120 is based on fraud, the time when the right to sue accrues must, I think, be determined in consonance with the principle governing the other specific suits based on fraud and that is, that the time when the fraud becomes known becomes the starting point for limitation.

18. Obviously, knowledge of the existence of a document transferring the property of the debtor is not enough. There should be knowledge of facts from which an inference can be drawn that the transfer is with an intent to defeat or delay the creditors. That knowledge cannot, of course, be expected to comprise all the facts and circumstances which may, during the course of an elaborate trial, be brought out; but there must be knowledge of facts which would reasonably lead to a definite conclusion and not such as would merely raise a bare suspicion. In Indranath Banerjee v. Rooke I.L.R. (1909) Cal. 81 the plaintiff instituted a suit against the defendants for setting aside a lease which he alleged he had been induced to grant to the first defendant under fraudulent representations made to him by his agent, the second defendant, who had received a bribe of Rs. 500 from the first defendant. The lease was dated 28th June 1898 and the suit was instituted in 1907. It was admitted by the plaintiff-that even shortly after the execution of the lease he had reason to suspect that the lease had been obtained by fraud. But it was asserted that the payment of the bribe came to his knowledge in May 1906 owing to disclosures made in the course of the evidence given by certain witnesses in another suit. It was held that the suit was not barred as the plaintiff must be deemed to have had knowledge of fraud only in 1906. Richardson, J., dealing with this point observes at page 85:

Mr. Rooke admits that shortly after the execution of the lease of the 31st September, 1899, he had reason to suspect that the lease had been obtained by fraud; but he says in effect that he had no certain information on the subject on which he could act before the disclosures of April and May 1906. We think that this is a good answer to the objection under consideration. Mr. Rooke had no substantial ground to go upon until he came to know of the payment which had been made to Bejoy and until then it appears to us that the fraud alleged did not become known to Mr. Rooke within the meaning of Article 95. Mere suspicion is not knowledge.

19. The case reported in Moidiyan's son Punnayil Kuttu v. Raman Nair (1907) 18 M.L.J. 19 : I.L.R. 31 Mad. 230 illustrates this principle, namely, that a fact, which might make the plaintiff suspect the bona fides of a transaction may not, however, lead him necessarily to the positive conclusion that the transaction is fraudulent. There A, fraudulently representing to B, to whom he was indebted, that a sum of money was due to him from C, induced B to take an assignment of the alleged debt due from C in satisfaction of his debt. In a suit by B as assignee against C, the latter in his written statement denied the existence of any debt due to A and B's suit was dismissed after trial on the ground that C owed nothing to A. B filed a suit to recover from A damages on the ground that A had by fraudulent representation induced B to take the assignment. It was contended for the defendant that time began to run from the date of the written statement in the prior suit by B against C in which C definitely denied the existence of the debt as that must have made the plaintiff suspect the fraud of A. But the contention was overruled and it was held that the fraud must be held to have been discovered only when the Court found that no debt was due. As the Judicial Committee point out in Rahimbhoy Habibhoy v. Charles Agnew Turner (1892) L.R. 30 IndAp 1 : I.L.R. 17 Bom. it is not enough to show that some ' clues and hints ' reached the plaintiff which ' perhaps, if vigorously and actually followed up, might have led to a complete knowledge of the fraud.' There must be something more.

20. Ultimately, the whole question resolves itself into a question of pure fact depending upon the circumstances and the probabilities of each particular case (vide Krishndn v. Sridevi I.L.R. (1889)Mad. 512 In the present case it is said that every fact from which an inference of fraud could be drawn was known or must have been known to the Official Receiver long prior to six years before the institution of the suit. This contention is chiefly based upon proceedings relating to two prior insolvency petitions in 1932, namely, I.P. No. 8 of 1932 and I.P. No. 20 of 1932, which have been mentioned earlier but, it is necessary now to deal with them in some detail.

21. In I.P. No. 8 of 1932, Sub-Court, Devakottah, filed by Chinnayya Servai, one of the acts of insolvency alleged was the execution of the mortgage in question. The petitioner alleged that the said document was a sham and nominal transaction and in any event a fraudulent preference intended to defeat and delay the petitioner and other creditors. This petition was dismissed on 9th April, 1934. From the portion of the order relating to this mortgage it becomes evident that though in the petition it was alleged that the mortgage was a sham and nominal transaction, at the trial the petitioner wanted to maintain only that it was a fraudulent preference. Beyond a registration copy of the mortgage no documents were filed and the petitioner was the only witness on his side. It was apparently admitted on behalf of the petitioner that the debts which purported to form the consideration for the mortgage were true. It was held that a mere transfer of property to one of several creditors is no preference over other creditors unless the dominant intention of the debtor was to give advantage to that particular creditor and thereby defraud others. The Court held that the petitioner had not discharged the burden which lay on him.

22. The other petition, I.P. No. 20 of 1932, filed by Muthukaruppan Chettiar, contained the following allegation in paragraph 5:

With intent to defeat the petitioner and other creditors the respondent has mortgaged his dwelling house at Kottaiyur for Rs. 52,101-1-6 on 29th January, 1932.

23. At the trial the only witness examined on behalf of the petitioner was the petitioner's agent and the Court found that he knew nothing personally of the transaction evidenced by the mortgage in question. In fact, a perusal of the order on this petition clearly shows that there was not even the slightest attempt made to sustain the allegation in the petition. There is nothing which came out at the trial that could even make any one suspect the honesty of the transfer. We find ourselves unable to say that a mere perusal of these proceedings was sufficient to impress the Official Receiver with knowledge of the fraud.

24. The following is the allegation made in the present plaint in regard to the cause of action:

Cause of action, for this suit arose in or about the 12th December, 1939, when the public examination of the insolvent in I.P. No. 29 of 1935, on the file of this Court was completed and when the real facts and circumstances relating to the mortgage, dated 29th January, 1932 and the fact that it was executed at Chidambaram came to light to the creditors of the said insolvent.

25. The Official Receiver himself has given evidence as P.W. 1 as follows:

Only after the examination I came to know that there were sufficient circumstances to impeach the mortgage as fraudulent.

26. In these circumstances we consider that the well-established rule should apply, namely, that it is incumbent on the defendant to show that the plaintiff' had clear and definite knowledge of the fraud at a time which is too remote to allow him to bring the suit.' (Vide Rahimbhoy Habibhoy v. Charles Agnew Turner The present suit was filed on 24th February, 1943. It must therefore be shown by the defendants that the Official Receiver knew such important facts as would necessarily lead him to draw an inference of fraud some time before 24th February, 1937. The adjudication itself was on 14th July, 1936 and the diary kept by the Official Receiver shows that, the insolvent was not co-operating properly and rendering assistance to the Official Receiver. In fact, only two of his account-books were produced early in September, 1935 and the other account-books, about III, were filed very much later. There is nothing in the notes paper of the Official Receiver to suggest that at any time prior to February, 1937, any facts in respect of this mortgage came to his notice. Hi subsequent conduct, namely, his application in October, 1940, for leave to file a petition under Section 4 of the Provincial Insolvency Act, also indicates that it was only after the public examination that he had clear and definite knowledge of facts leading to a conclusion of fraud. It may well be that proceedings of the prior insolvency petitions might have led the Official Receiver to think that the mortgage was supported by consideration and that possibly it was only a case of a fraudulent preference, in which case no suit would lie under Section 53 of the Transfer of Property Act. It is not unreasonable to suppose that it was only after a perusal of the account-books and the public examination at length of the insolvent in 1939 that facts entitling him to institute a suit became knownto him. The defendant have not been able to prove anything to the contrary.

27. It is clear that Muthukaruppan Chettiar is one of the prominent creditors financing the suit. It is well known that the Official Receiver often does not take the risk of a litigation unless a creditor or the body of creditors is willing to take the financial burden. It may also be that this creditor had all along the suspicion that this was not a straight transaction. But all this cannot have any bearing on the question of limitation with which alone we are now concerned.

28. Two of the creditors came and deposed as P. Ws. 2 and 3 that they did not know of the suit mortgage till recently. We are not disposed to attach much weight to their testimony. The question is not if any of the creditors or the Official Receiver knew of the existence of the mortgage but whether the Official Receiver knew the facts which would necessarily lead him to infer that the mortgage was a fraudulent transfer.

29. We hold that the suit cannot be held to be barred by limitation. The decree of the Subordinate Judge is set aside and the suit is restored to his file to be tried on the other issues. Costs of this appeal shall abide the result. The appellant shall be entitled to a refund of the court-fee paid on the memorandum of this appeal.


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