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Cheruthazhath Abdulla Haji Vs. Cheriyandi Ibrayan Kutti and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in50Ind.Cas.959
AppellantCheruthazhath Abdulla Haji
RespondentCheriyandi Ibrayan Kutti and ors.
Cases ReferredHakim Lal v. Mushahar Sahu
Excerpt:
.....on ground of transaction falling under section 68--right to plead section 63 in defence--sham transaction and transaction intended to create title, distinction between. - - 5 raises a more particular question, whether the plaintiff was a transferee in ii good faith and for consideration. every transfer of immoveable property, made with intent to defraud prior or subsequent transferees thereof for consideration, or co-owners or other persons having an interest in such property, or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed. the 2nd defendant was in embarrassed circumstances at the time, the plaintiff was a close relation of his, and if the allegations of the 5th defendant are well founded, it might..........with a mortgage instead of a sale which, it is not suggested, can make any difference. the fall bench decision followed another decision of my learned brother sitting in a division bench reported in palaniandi chetti v appavu chettiar 34 ind. cas. 778 : 30 m.l.j. 55 : 19 m.l.t. 390 mr. menon strongly urged upon us that the fall bench ruling requires re-consideration, and has referred to several decisions bearing upon the question which he says were not placed before the full bench. one of the cases directly bearing on the point is a decision of the calcutta high court reported in abdul kader v. ali miah 14 ind. cas. 11 : 15 c.l.j. 649 : 16 c.w.n. 717 there it was held that voidable at the option does not mean that there must be a suit instituted in order to set aside the transaction;.....
Judgment:

Abdur Rahim, J.

1. Defendants No's. 1 and 2 were doing some business and got into embarrassed circumstances about the date of the transaction in question. That transaction is a mortgage of Rs. 5,000 executed by the 2nd defendant on certain proper-ties belonging to him in favour of the plaintiff, the 1st respondent before us. The 5th defendant in the suit, the appellant in this appeal, is a purchaser of some of the properties at a sale held in execution of decrees obtained against the 2nd defendant by defendants Nos. 3 and 4, The plaintiff preferred a claim before the executing Court and that Court held in favour of the appellant. The finding of the executing Court was that the mortgage was a colourable transaction intended to save the 2nd defendant's private properties in the calamity that was in view. The plaintiff has filed the present suit in order to have it declared that the mortgage is a valid and binding transaction and that the sale to the 5th defendant is valid only subject to this mortgage. The order of the Court executing the decree would have the effect under the Civil Procedure Code of concluding the rights of the parties if no suit was instituted. The main question which was tried before the learned District Judge was set forth in issues Nos. 4, 5 and 6. I think, all taken together, they were meant to raise the questions whether the mortgage in question was invalid, having been executed to defeat or delay the creditors of the 2nd defendant. That is the exact language of issue No. 4. Issue No. 5 raises a more particular question, whether the plaintiff was a transferee in II good faith and for consideration. Issue No. 6 says, 'whether the Kanom deed is valid and binding on the defendants Nos. 3 and 4. The evidence bearing on the point is fully treated in the judgment of the Acting District Judge and his conclusion is, what ever motives might have led the plaintiff into the transaction, the mortgage, was not void for want of consideration, He seems inclined to find that at least Rs. 2,800 were paid for Exhibit A, if not more. But it is not necessary to express any opinion on the question of fact whether any consideration passed between the parties and if so, what was the amount advanced by the plaintiff. The whole case of the contesting defendant was that the transaction was entered into for the purpose of defrauding the creditors of the 2nd defendant and was invalid on that ground. That what is expressly stated in paragraphs and 4 of the written statement of the 3rd defendant and the 5th defendant's written statement also is to the same effect. The issues, as I have already stated, also raise the same question, that is, in effect, whether the transaction was one which came within the purview of Section 53 of the Transfer of Property Act. No doubt the District Judge, in paragraph 9 of his judgment, states: 'The form of these issues (issues Nos. 5 and 6) appears to be due to the fact that, when they were framed, it was not clear that, as decided in Palaniandi Chetti v. Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390 the question, whether the mortgage was voidable under Section 53 of the Transfer of Property Act, did not arise and the only question was, whether it was void.' If the transaction came within the purview of Section 53 at all, then whether it was called void or voidable would not make any difference, if by 'void' is meant, as apparently it was intended by the parties to mean, a transaction for which there was no consideration. Section 53 of the Transfer of Property Act says: Every transfer of immoveable property, made with intent to defraud prior or subsequent transferees thereof for consideration, or co-owners or other persons having an interest in such property, or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded, defeated or delayed.

Where the effect of any transfer of immoveable property is to defraud, defeat or delay any such person, and such transfer is made gratuitously or for grossly inadequate consideration, the transfer may be presumed to have been made with such intent as aforesaid.

2. Now the evidence on which the learned Counsel for the appellant relied would, if believed, show that it was a transaction, the object of which was to defeat the creditors of the 2nd defendant. The 2nd defendant was in embarrassed circumstances at the time, the plaintiff was a close relation of his, and if the allegations of the 5th defendant are well founded, it might well be that the transaction was entered into with the intention of defeating the creditors of the 2nd defendant. That was the case put forward by the appellant. But then Mr. Menon has argued for the appellant that the transaction was a 'sham' and that if it is a sham, it does not come within the purview of Section 53, Transfer of Property Act. He says that it was merely a piece of paper got up by the parties and there was no intention to give effect to it at all in any way. No doubt if it was only a paper got up simply for amusement's sake Section 53 will not apply. But that is not the case of Mr. Menon's client. His case is that there was a very serious intention in fact for executing Exhibit A, and that was to defeat the 2nd defendant's creditors; Lt is clear that effect was intended to be given to it, if not between the 2nd defendant and the plaintiff, at least so far as the claims of the 2nd defendant's creditors are concerned, and that is just the case which is covered by Section 53, Transfer of Property Act. Whether we call that a sham transaction or void, it does not make the slightest difference. The Legislature calls it voidable, because until it is set aside it has certain legal consequences.

3. If that was the nature of the transaction as was the case of the defence, the Full Bench ruling of this Court reported in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 : 33 M.L.J. 705 : 6 L.W. 750 : 41 M.P 612, to which my learned brother was a party, stands in the way of the appellant. It decides: 'Where an unsuccessful intervenor in claim proceedings institutes a suit under Order XXI, Rule 63, Civil Procedure Code, for declaration of his title as vendee from the judgment debtor and for cancellation of the summary order dismissing his claim, it is not open to the judgment, creditor (defendant) to resist the plaintiff's suit on the ground that the sale to the plaintiff was a fraud on the creditors of the vendor, unless the transfer had been previously avoided by the creditor in a properly instituted suit,' that is to say, Section 53 cannot be pleaded merely as a defence: a suit has to be instituted by the creditor whose rights are affected by the transaction to have that transaction set aside. Until then, no defence founded on Section 53 can be pleaded. That is exactly this case, except that here we are concerned with a mortgage instead of a sale which, it is not suggested, can make any difference. The Fall Bench decision followed another decision of my learned brother sitting in a Division Bench reported in Palaniandi Chetti v Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390 Mr. Menon strongly urged upon us that the Fall Bench ruling requires re-consideration, and has referred to several decisions bearing upon the question which he says were not placed before the Full Bench. One of the cases directly bearing on the point is a decision of the Calcutta High Court reported in Abdul Kader v. Ali Miah 14 Ind. Cas. 11 : 15 C.L.J. 649 : 16 C.W.N. 717 There it was held that voidable at the option does not mean that there must be a suit instituted in order to set aside the transaction; it is open to a person who has a right to avoid a transaction within the meaning of Section 53 to avoid it by any act manifesting his intention, and it need not necessarily be done by a suit. He has also referred to the ruling of the Privy Council in Bijoy Gopal Mukerji v. Krishna Mahishi Debi 34 C.P 329 : 11 C.W.N. 424 : 5 C.L.J. 334 : 9 Bom. L.R. 602 : 2 M.L.T. 133 : 17 M.L.J. 154 : 4 A.LJ. 329 : 34 I.A. 87 and has relied on the observation contained in a passage of the judgment of their Lordships at page 333 where they say that, when a transaction is voidable, it may be avoided at the option of the party affected by it. The ruling in Muthukumara Chetti v. Anthony Udayar 24 Ind. Cas. 120 : 38 M.P 367 : 29 M.L.J. 617 : 15 M.L.T. 361 of a Division Bench of this Court is to a similar effect. Then Mr. Menon points out that there had been a number of decisions of this Court which were directly opposed to the ruling of the Fall Bench in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 : 33 M.L.J. 705 : 6 L.W. 750 : 41 M.K 612. Some of those cases are referred to in the judgment of my learned brother in Palaniandi Chetti v. Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390 It is also pointed out that the language of Section 53, Transfer of Property Act, does not in any way imply that a suit has to be instituted to set aside the transaction if it is sought to be avoided by the creditor or creditors affected by it. No doubt the view of the law propounded in the Full Bench decision may lead to complications and difficulties, as in this case. Supposing the transaction to have been designed to defeat creditors, the appellant who is prejudiciously affected by it cannot plead this as a defence, the respondent-plaintiffs suit has to be decreed and the order of the executing Court nullified, the appellant being obliged to institute a suit to have the transaction set aside, although the order of the executing Court is in his favour. In fact, there is great force in Mr. Menon's argument that in such cases the proceedings before the executing Court would become more or less illusory. I must say that if the matter were res integra, I should have been inclined very seriously to consider the whole question. But my learned brother who has been a party to both the cases cited above adheres to his view, and I feel myself entirely bound by the Full Bench decision.

4. The appeal must, therefore, be dismissed with costs of the 1st respondent'.

Seshagiri Aiyar, J.

5. I entirely agree with my learned brother that in the circumstances of this case the transaction must be deemed to be one in which the parties intended that an interest should be secured to the plaintiff in the property mortgaged to him. The 5th defendant, in his written statement, apparently understood the transaction in that light, Therefore, it is not open to the learned Counsel for the appellant now to say that this was a case of a sham transaction altogether. I think it, however, desirable to remove certain misconceptions regarding the effect of the Full Bench decision in Subramania Ayyir v. Muthia Chettiar 43 Ind. Cas. 651 : 33 M.L.J. 705 : 6 L.W. 750 : 41 M.P 612. All transactions, whether they are sham or are intended to secure some interest in the property, are within the mischief of Section 53, Transfer of Property Act if their effect is to defeat or defraud creditors. In some of them there may be no intention at all that the transferee should have any interest in the property. Such transactions are generally known as sham or colourable transactions. In other cases, e.g., gift to relations or sales for inadequate consideration, there may be an intention to transfer the property, but the effect of the transfer would be to defeat or delay creditors. Therefore, both classes of cases are within the purview of Section 53, Transfer of Property Act. The essential difference between a sham transaction and the transaction of the other class which I have just now mentioned as affecting the position of the defendant in a suit is this: In the case of a sham transaction, where there is no Intention to transfer property, the defendant can answer a person who comes into Court to set aside the adverse order passed in execution proceedings: 'You have no locus standi to bring the suit, because you have no interest in the property as nothing has been secured to you by the transfer. You are only a screen for the real owner and, therefore, you have no right to bring the suit.' That is the reason which actuated me at any rate when I consented to an issue being remitted in the case in Palaniandi Chetti v. Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390. We wanted to ascertain in that case whether the plaintiff who brought the suit had any interest which enabled him to contest the position of the defendant. I think it necessary to draw attention to this aspect of the case, because a great many misconceptions have grown round the Full Bench decision in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 : 33 M.L.J. 705 : 6 L.W. 750 : 41 M.P 612 and round the decision in Palaniandi Chetti v. Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390. Now Mr. Menon has asked us to reconsider the decision in the Full Bench case. He has quoted a large number of cases and he says he has not quoted the whole list of cases bearing on the point. Let us take it that he has quoted the best of those he has collected. I shall first take Abdul Kader v. Ali Miah 14 Ind. Cas. 11 : 15 C.L.J. 649 : 16 C.W.N. 717 a decision of two Judges of the Calcutta High Court, which is directly in point. It is permissible to point out that the learned Judges seem to have ignored the observations of Mookerji, J., in Hakim Lal v. Mooshahar Sahu 11 C.W.N. 889 : 6 C.L.J. 40 which decision was confirmed by the Privy Council in Musashar Sahu v. Lala Hakim Lal 32 Ind. Cas. 343 : 43 C.P 521 : 30 M.L.J. 116 : 3 L.W. 207 : 20 C.W.N. 393 : 14 A.L.J. 198 : 1996 1 M.W.N. 198 : 19 M.L.T. 203 : 23 C.L.J. 406 : 18 Bom. L.R 378 : 43 I.A. 404 ; they seem to have ignored also the decision in Chatterput Singh v. Maharaj Bahadur 32 C.P 198 : 2 A.L.J. 190 : 9 C.W.N. 225 : 32 I.A. They have not referred to the opinion of Telang, J., in Burjorji Dorabji Patel v. Dhunbai 8 Ind. Dec. (N.S.) 479 which directly touches this point and to another decision of Sir Lawrence Jenkins, C.J., a very high authority, in Ishwar Timappa v. Devar Venkappa Shanbog 27 B.P 148 : 5 Bom. L.R. 19 in which the learned Judge has held that without bringing a suit it is not open to a defendant to plead that the transaction is invalid. No doubt there are some cases in Madras the other way; but the point we are now discussing was not directly raised in them. Mr. Menon has asked us to say that because of these decisions the matter should be referred to a Fall Bench of five Judges. It is dear that a matter which has not been considered directly should not be regarded as an authority. Take the latest decision of the Judicial Committee. The Judicial Committee had been allowing appeals under the Land Acquisition Act for any number of years, and when their attention was drawn to Section 54 of the Land Acquisition Act, they put an end to the practice and refused to allow further appeals under the Act for a number of years: the view apparently being that if the matter was not considered directly, the decision should not be regarded as binding on Courts. It is only where the matter has been debated by Counsel at the Bar, and where a considered judgment has been given, that Counsel is entitled to say that that decision has not been considered. For these reasons I am of opinion that nothing that has been said this evening by Mr. Menon has in any way shaken my opinion regarding the soundness of the decisions in Palniandi Chetti v. Appavu Chettiar 34 Ind. Cas. 778 : 30 M.L.J. 55 : 19 M.L.T. 390 and in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 : 33 M.L.J. 705 : 6 L.W. 750 : 41 M.P 612. I adhere to them. In my opinion, there will be no difficulty in giving effect to them.

6. There is one matter to which my learned brother has drawn attention. It is a vary serious matter, and I think it requires further consideration. For example, the person in whose favour an order has been passed is in the unfortunate position of not being able to defend that order in the suit. No doubt, that is a serious position. But there are other difficulties the on her way. Any number of persons may raise similar defences in different suits by a person to whom property has been transferred. They may be in different Courts. There may be different decisions, one holding that the transaction is an honest one, another that it is a sham one and a third that it is for inadequate consideration. In order to avoid multiplicity of proceedings and in order to avoid possible divergence of judicial opinion it has been ruled by Mookerjee, J., in Hakim Lal v. Mushahar Sahu 32 Ind. Cas. 343 : 20 C.W.N. 393 : 14 A.L.J. 198 : 1996 1 M.W.N. 198 : 19 M.L.T. 203 : 23 C.L.J. 406 : 18 Bom. L.R 378 : 43 I.A. 404 following Chatter put Singh v Maharaj Bahadur 32 C.P 198 : 2 A.L.J. 190 : 9 C.W.N. 225 : 32 I.A. that there should be one suit like an administration suit in which he matter should be directly put in issue and it should be open to appeal and second appeal. No doubt the difficulties pointed out by my learned brother are of a very serious character, but the other difficulties outweigh them. I am, therefore, of opinion that the decisions to which I was a party should be adhered to. I agree in the order proposed by my learned brother.


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