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Subramania Pillai Vs. Dakshnamurthi Mudaliar and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in15Ind.Cas.193
AppellantSubramania Pillai
RespondentDakshnamurthi Mudaliar and ors.
Excerpt:
assignment of debt - fraud on creditors--creditor entitled to impeach such assignment and attach the debt--purchaser of debt at court-auction entitled to the same rights--whether debtor entitled to say that he is bound to pay one claimant and not another. - .....the plaintiff gave notice of the assignment made to him to the 1st defendant. subsequent to this notice, nallakannan's right was attached by subramania pillai, who had obtained a decree against nallakannan, and was brought to sale and purchased by the 5th defendant. the result is, there are two persons claiming the rights which nallakannan originally had--the plaintiff who got an assignment from him, and the 5th defendant who purchased his right in court-auction. the 5th defendant contended that the assignment in favour of the plaintiff was intended to defraud the creditors of nallakannan and that, therefore, he and not the plaintiff was entitled to recover from the 1st to the 4th defendants the amount due for the ticket. this plea has been upheld by the subordinate judge, who finds.....
Judgment:

Sundara Aiyar, J.

1. This is an application to revise the judgment of the Subordinate Court of Tinnevelly in Small Cause Suit No. 1476 of 1909. The plaintiff is the assignee of the rights of Nallu kannan, a ticket-holder in a chit conducted by the 1st defendant. Defendants Nos. 2 to 4 are the sons of the 1st defendant. The plaintiff gave notice of the assignment made to him to the 1st defendant. Subsequent to this notice, Nallakannan's right was attached by Subramania Pillai, who had obtained a decree against Nallakannan, and was brought to sale and purchased by the 5th defendant. The result is, there are two persons claiming the rights which Nallakannan originally had--the plaintiff who got an assignment from him, and the 5th defendant who purchased his right in Court-auction. The 5th defendant contended that the assignment in favour of the plaintiff was intended to defraud the creditors of Nallakannan and that, therefore, he and not the plaintiff was entitled to recover from the 1st to the 4th defendants the amount due for the ticket. This plea has been upheld by the Subordinate Judge, who finds that out of the consideration of Rs. 140 for the assignment, Rs. 105 was not paid for discharging a debt due by Nallakannan, as alleged by the plaintiff. The remaining Rs. 35 is said to have been paid to Nallakannan in cash before the Sub-Registrar. That amount is not said to have been used for the purpose of discharging any other debt of Nallakannan. I must accept the finding that the assignment in the plaintiff's favour was intended to defeat the creditors of Nallakannan. In fact the petition does not impeach the finding.

2. The question raised by the learned Counsel for the petitioner is that, even taking this to be the fact, he is entitled to recover, as his assignment, which was by a registered instrument, was completed by notice being given to the 1st defendant. There can be no doubt that the assignment was complete as between the plaintiff and Nallakannan and could not be impeached by the latter. But I think it is settled law that, although as between the transferor and transferee in the case of an assignment which is intended to defeat creditors, the assignor's rights must be regarded as having vested in the assignee, the creditors of the assignor are not bound by such an assignment and are entitled to attach the property assigned as being still the property of the assignor so far as the debts are concerned. It is the practice for creditors to' attach property fraudulently assigned away by their judgment-debtors as being still property available for the satisfaction of their debts in execution of their decrees. When such an attachment is made, the assignee puts in a claim petition and the question is tried by the Court, whether the assignment is valid as against creditors, or invalid and, therefore, as not standing in the way of execution by the creditor who attaches the property as still belonging to the judgment-debtor so far as the satisfaction of the creditor's decree is concerned. And if the claim is allowed or disallowed and a regular suit is instituted either by the judgment-creditor or by the assignee, the validity of the assignment is determined in an original suit. So far, therefore, as Subramania Pillai, who obtained the decree against Nallakannan Pillai, was concerned, he must be regarded as having been entitled to attach the property notwithstanding the assignment in the plaintiff's favour; and if he could do so and impeach the plaintiff's right as assignee, I can find no good reason for holding that the purchaser at a sale held in pursuance of his attachment cannot also impeach the plaintiff's right.

3. The 5th defendant must have the same rights as Subramania Pillai to call in question the assignment in the plaintiff's favour; for otherwise the privilege that a decree-holder has to attach property that has been fraudulently assigned away, would be practically useless. I must, therefore, hold that the 5th defendant is entitled to show that his purchase is good as against the plaintiff's rights as assignee from Nallakannan Pillai.

4. Mr. Deva Doss contended that even then the 1st defendant and his sons, defendants Nos. 2 to 4, are bound to make payment to the plaintiff. I am unable to uphold this argument. If there are two competing claimants to the same debt, it is clear, in my opinion, that the debtor is entitled to say that one of them is the person really entitled to payment from him and not the other. It is argued that when Subramania Pillai attached the debt, it was the duty of the 1st defendant, who had already received notice of the plaintiff's assignment, to say that he had already received notice that Nallakannan had made an assignment in the plaintiff's favour. I can find no authority for holding that there was any such duty in him at law, Under the present Code, which provides for garnishee proceedings, a debtor would, no doubt, have to state whether there is really any debt due by him. Bat under the old Code, debts attached were often sold and there was no duty on the part of the debtor to admit or deny the existence of a debt in execution proceedings. It was quite open to him to wait until the purchaser at Court-auction sued him for the debt. He could then deny that what was sold by Court was absolutely worthless, as no debt was due by him at all to the, judgment-debtor whose property was attached. I am, therefore, of opinion that it was open to the 1st defendant to contend that he was bound to make payment to the 5th defendant and not to the plaintiff. Besides, it-is difficult to see how the plaintiff suffered any prejudice by the first defendant not bringing the plaintiff's assignment to the notice of the Court when the 5th defendants made the attachment.

5. It is then alleged by the learned Counsel that his client was a bona fide assignee for consideration without notice. I can find no trace of any such plea having been raised in the lower Court, nor does the plaintiff say so in his evidence. I am, therefore, unable to allow this question to be argued here for the first time.

6. It is also suggested that probably the attachment by Subramania Pillai and the purchase by the 5th defendant were all collusive transactions brought about by Nallakannan himself or by the 1st defendant. And attention is drawn to the fact that, when the plaintiff gave notice of assignment in his favour, the 1st defendant stated that there had already been an oral assignment in favour of Subramania Pillai, the very person who subsequently attached the debt in execution of his decree. Here, again, the contention was not raised in the lower Court and I cannot entertain it in revision.

7. I must, therefore, hold, on the finding that the' assignment in the plaintiff's favour was intended to defeat the creditors of Nallakannan, that the purchase by the 5th defendant at Court-sale must be upheld as against the plaintiff, and that the 1st defendant, the debtor, is entitled to refuse to make payment to the plaintiff.

8. The petition must, therefore, be dismissed with costs.


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