1. The plaintiff instituted this suit against defendant l- on a mortgage. Defendants 2 and 3 had prior to the institution of the suit obtained a decree against defendant 1 and in execution thereof had put the mortgaged property to sale. Defendant 3 purchased the property at the sale. He resists the plaintiff's suit on the ground that the mortgage is invalid as it was effected without consideration and for the purpose of defeating and delaying creditors. The learned Munsif held that the plaintiff had not paid consideration for the mortgage and that the transaction was a fraudulent one entered into by defendant 1 and the plaintiff with the object of defeating and delaying the creditors of the former. On these grounds he dismissed the suit. On appeal the learned subordinate Judge held that part of the consideration for the mortgage was real and gave the plaintiff a mortgage decree with respect to that part. Defendant 3 appeals and raises the following points:
First, he says that the appeal to the lower appellate Court was barred by limitation. The decree was signed on 13th March 1937 and the appeal was filed on 26th April 1937. Application was made for copies of the judgment and decree on 18th March 1937 and the plaintiff was notified about the requisite number of folios and stamps on the same date. Stamps and folios as required were supplied on 19th March 1937 and 25th March 1937 was the date fixed for delivery of the copies. On that date the plaintiff came to know that further stamps and folios would be required. 26th March to 29th March were holidays. On 30th March the plaintiff supplied the additional stamps and folios and on 31st March the copies were delivered. If this period between 18th March to 31st March be one which can be described as being a period requisite for taking out copies then admittedly the appeal is within time. It is pointed out on behalf of the appellant that on 20th March 1937 the copying department notified that further stamps and folios would be required and that the plaintiff should have supplied the requisites on 22nd March which was the next day on which the Courts were open, 2lst March being a holiday. The requisites were not filed as has already been stated till 30th March. It is contended on behalf of the appellant that the period between 22nd March and 30th March should not be considered as time 'requisite for obtaining copies' within the meaning of S.12, Sub-section (2), Limitation Act, and that if this period is excluded the appeal will be out of time. The point for decision therefore is whether the plaintiff can be given the benefit of this period.
2. The word ' requisite ' has been interpreted by the Privy Council. It has a meaning which is stronger than the word 'required.' It means properly required and it throws upon the lawyer for the plaintiff the necessity of showing that no part of the delay beyond the prescribed period is due to his default: Jiphoy N. Suity v. T.S. Chettyar Firm ('28) 15 AIR 1928 PC 103.Can it be said that the delay between 22nd March 1937, when it is contended the requisites should have been filed and 30th March 1937 when the requisites were actually filed was due to the default of the plaintiff? I think it cannot. It is true that on 20th March 1937 the copying department notified that further folios and stamps would be required. This fact was not notified directly to the plaintiff or his lawyer but it was notified in the manner provided by Rule 626 and Rule 636 of the High Court Rules and Circular Orders, that is to say, an entry was made in the prescribed register which was kept in the court offices at a place convenient for public inspection. It is true that this is the only mode of publication prescribed by the rules of this Court. But there is a peculiar circumstance in this case which cannot be ignored. When the plaintiff was told on 18th March 1937 what stamps and folios were required he was also told that the copies would be ready on 25th March 1937. As he was expressly told that the copies would be ready on 25th March 1937 there was no further duty on him or his lawyer to go to the Court on intervening days to ascertain from the register whether further stamps or folios were necessary. In circumstances like these an entry in the register on an intervening date to the effect that more folios and stamps were required would not amount to a notice to the plaintiff. The Court by its previous intimation to the plaintiff that the copies would be ready for delivery on 25th March 1937 relieved the plaintiff of the duty of making any further inquiry before 25th March, hold therefore that the whole period from 18th March 1937 to 31st March 1937 was requisite for obtaining copies and that the appeal before the learned Judge was not barred by limitation.
3. The next point argued was that the learned Judge in the Court of appeal below was wrong in admitting evidence at the appellate stage and that if this evidence be excluded there was nothing before the Judge which would justify him in reversing the findings of the learned Munsif that there was no consideration for the mortgage and that that transaction was gone through for the purpose of defeating creditors. There is substance in this argument. The consideration for the mortgage according to the plaintiff is Rs. 400. This sum is made up of two sums. Rs. 200 was advanced in cash on the date of the mortgage. The balance consisted of antecedent debts. Rs. 60 had been advanced to defendant 1 about 10 years prior to the mortgage; this sum together with interest due thereon and a further loan of Rs. 12 amounted to Rs. 200. The learned Munsif disbelieved the plaintiff's ease both as regards the advance on the date of the mortgage and also as regards the antecedent debts. In the appellate Court, the plaintiff's pleader produced a bond to prove the advance of Rs. 60 and prayed that it should be admitted in evidence. The Court allowed the prayer and the bond was proved by two witnesses who also proved endorsement of payments of interest thereon. The learned Judge accepting this evidence has held that the plaintiff has been able to prove that on the date of the mortgage the defendant owed the plaintiff Rs. 200 on the antecedent transactions.
4. He gave the plaintiff a mortgage decree for the sum of Rupees 200 only upholding in effect, though not in so many words, the Munsif's finding that the plaintiff had not been able to prove the advance of Rs. 200 on the date of the mortgage. The contention of the appellant is that this additional evidence should not have been admitted. I agree with this view. The appellate Court has the power to take additional evidence under Order 41, Rule 27(1) (a) and (b), Civil P.C. Rule 27 (1) (a) refers to a case where the Court from whose decree the appeal is preferred has refused to admit evidence which it ought to have admitted. This portion of Rule 27 has no application to the present case. There remains Rule 27 (1) (b). This rule says that the appellate Court may allow evidence to be given if it requires such evidence to enable it to pronounce judgment or for any other substantial cause. From the wording of the rule, it is quite clear that it comes into operation only when the Court requires fresh evidence. The requirement must be of the Court and not of the party to the litigation. When the Court is of opinion that without fresh evidence it cannot pronounce judgment or that without fresh evidence it finds it difficult to perform its functions then and then only will the Court admit fresh evidence under O.41, Rule 27 (1) (b). The rule is not intended to assist a party who through negligence or over confidence fails to produce sufficient evidence to prove his case in the Court below. If the Court upon the evidence on the record is able to pronounce judgment or perform its functions it has no jurisdiction to admit further evidence. This rule has been the subject of interpretation in several decisions of the Privy Council the latest of which is Parsotim v. Lal Mohar . The earlier decisions in Kessowji v. G. I. P. Railway Co ('07) 34 IA 115 and Inderjit Pratab Bahadur v. Amar Singh ('23) 10 AIR 1923 PC 128 were discussed and explained in this judgment. This is what their Lordships say:
The provisions of S.107, sub-s.(1)(d),Civil P.C., as elucidated by Order 41, Rule 27 are clearly not intended to allow a litigant who has been unsuccessful in the lower Court to patch up the weak parts of his case and fill up omission in the appellate Court....under Rule 27 (1) (b) it is only when the appellate Court 'requires' it (i. e., finds it needful) that additional evidence can be admitted. It may be required to enable the Court to pronounce judgment or for any other substantial cause, but in either case it must be the Court that requires it...The legitimate occasion for the exercise of this discretion is not whenever before the appeal is heard a party applies to adduce fresh evidence, but when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent.
5. Now, in the present case, defendant 3 at the very outset challenged the validity of the mortgage, stating that no consideration had been paid. The parties went to trial on the issue regarding consideration. It was the plaintiff's duty to place all the available evidence he had before the Court to prove consideration. The plaintiff did not produce any bond to prove that there was a valid and existing antecedent debt. He contented himself with producing other evidence which the Court below has disbelieved. In these circumstances it cannot be said that the appellate Court 'required' this additional evidence for the proper disposal of the appeal. The evidence as it stood was quite sufficient to enable the Court to come to a decision on the question regarding consideration. I hold therefore that the lower appellate Court erred in law in admitting the bond in evidence. The bond must be excluded. The question then arises whether upon the evidence adduced in the trial Court it can be said that the plaintiff has succeeded in proving that there was an antecedent debt. The learned Munsif after reviewing the evidence has come to the conclusion that the story of an antecedent debt is false. At the time of the alleged antecedent advance, the plaintiff himself was heavily indebted; a few months before the alleged advance he borrowed Rs. 500 on a usufructuary mortgage of his lands and before that he had borrowed another Rs. 100. The loan of Rs. 500 has not yet been repaid. The plaintiff is not a money-lender and he says that apart from the loans in respect of the mortgage in suit he has not lent money. Upon this evidence I consider that the learned Munsif was right in his view that the plaintiff had failed to prove the alleged antecedent advance made by him and that the learned subordinate Judge was wrong in reversing this finding. As regards the alleged advance at the time of the mortgage, the learned subordinate Judge has accepted the finding of the trial Court that no such advance was made and I have no hesitation in concurring in this view. In the result I must hold that no consideration was paid for the mortgage by defendant 1. It has been established beyond challenge that defendant 1 was heavily in debt at the time of the mortgage. The inference is therefore irresistible that the mortgage was effected to defeat and delay creditors. It falls within the mischief of Section 53, T. P. Act, and must be held to be voidable at the instance of defendant 3 who is a creditor and who was so at the time of the mortgage.
6. On behalf of the appellant it was further argued that even if one accepted all the findings of the Court of appeal below the suit should be dismissed. It was pointed out that the learned subordinate Judge accepted the position that part of the alleged consideration was fictitious and that the mortgagor and mortgagee entered the fictitious consideration in the mortgage bond in order to shield the mortgagor's property from his creditors. It is argued that in these circumstances the Court should have held that the entire transaction was voidable and that it erred in law in giving the plaintiff a decree to the extent of the consideration proved to have been paid. There is a certain amount of conflict of judicial decision on this point in the different High Courts. In the case in Chidambaram Chettiar v. Sami Aiyar ('07) 30 Mad 6 the view was expressed that when a transaction is entered into to defeat and delay creditors the whole transaction becomes voidable even though part of the consideration was actually paid. This case related to an assignment of moveable property and as such it did. not fall directly within the purview of Section 53, T. P. Act, but the general principle was laid down that when a transaction was entered into to defeat and delay creditors the entire transaction would be voidable even though part of the alleged consideration was paid. In the case in China Pitchiah v. Pedakotiah ('11), 36 Mad 29 a contrary view was taken it being held
that the fact that the mortgage was for an amount larger than was really paid was no reason for not upholding it to the extent that it was supported by a debt existing at the date of the mortgage and that the mortgagee was entitled to a decree for the amount actually paid by him.
7. This view was dissented from by the same High Court in the case in Visvanada Reddi v. Venkata Reddi : AIR1927Mad278 where it was held that when a transfer by way of mortgage was in fraud of creditors the transferee cannot as of right demand a mortgage decree for the amount actually paid by him. In the case in Bhikabhai Muljibhai v. Panachand Odhavji ('19) 6 AIR 1919 Bom 99 it was held by the Bombay High Court that when the mortgagor and mortgagee had the intention of defeating and delaying creditors and part of the consideration was fictitious the entire mortgage was voidable and it could not be enforced partially in respect of the consideration which was actually paid. The same view was taken by the Lahore High Court in the case in Waryam Singh v. Firm Thakur Das Dhamali Ram ('35) 22 AIR 1935 Lah 404. So far as this Court is concerned, in the case in Rajani Kumar Das v. Gour Kishore Shaha ('08) 35 Cal 1051 a mortgagee was given a decree to the extent of the consideration which was actually paid although part of the consideration mentioned in the mortgage deed was fictitious. It was pointed out in that case that the two portions of the alleged consideration were distinct and separate and that the mortgage was not fraudulent in so far as it related to the consideration which was actually paid. Their Lordships held that so far as the debts were real the mortgage may be regarded as a good transaction; so far as they were fictitious, that is so far as valuable consideration failed to pass, the mortgage must be held to be inoperative.
8. If nothing more had been said then I would be bound to uphold the view taken by the learned subordinate Judge that the plaintiff could be given a partial decree; but before coming to their conclusion their Lordships stated this:
It might also be that the plaintiffs had a bona fide intention of advancing the additional sum for enabling the mortgagors to carry on their business, that they put oft payment until the money was needed or until registration of the deed, but that as the Dass defendants either commenced their suit or were about to do so for a larger sum than Rs. 3647, the plaintiff withheld payment of the additional sum. They might not have had any such intention as would invalidate the instrument under Section 53, T. P. Act. Their moral turpitude in making a false case afterwards in the present proceedings would not be sufficient to deprive them of their legal rights, though a false case might reflect discredit on the original transaction.
9. From these observations it seems that the learned Judges were not satisfied that the mortgage was for the purpose of defeating or delaying creditors. It cannot therefore be said that it was laid down definitely in this case that where there was such an intention shared by both the mortgagor and mortgagee and where part of the consideration was fictitious and part real, the mortgage could be enforced partially to realize that portion of the consideration which was real. In this connexion I would also refer to the case in Krishna Kumar v. Joy Krishna ('16) 3 AIR 1916 Cal 349 where after referring to the cases in Rajani Kumar Das v. Gour Kishore Shaha ('08) 35 Cal 1051 and China Pitchiah v. Peda-kotiah ('11) 36 Mad 29 it was observed that a mortgage can be enforced for so much of the consideration as is proved to have been paid by the mortgagee to the mortgagor. The facts of that case were however quite different and the present question did not at all arise there for determination.
10. This being the state of the authorities even if it had been established that there was an antecedent debt and that it formed part of the consideration of the mortgage I would still hold that defendant 3 could avoid the mortgage 'in toto' inasmuch as the transaction was one which was entered into to defeat the creditors of the mortgagor of whom defendant 3 was one and inasmuch as a portion of the consideration was fictitious. It would be best to turn to the words of the statute, Section 53, T. P. Act, says that every transfer of immovable property made with intent to defeat or delay creditors of the transferor shall be voidable at the option of any creditor so defeated and delayed. It adds that nothing in the section shall impair the rights of a transferee in good faith and for consideration.
11. Now what is the transfer in this case? There was only one transfer and it was the mortgage in favour of defendant 1. The consideration for the transfer may be split up into parts but the transfer remains one and indivisible. It cannot be said that any particular portion of the property mortgaged was mortgaged for any particular part of the consideration. The entire property was mortgaged in one lot. What has therefore to be seen is whether this transfer was made with intent to defeat or delay creditors. It has been found that this was the intention of the mortgagor when he mortgaged the property. It may be that the mortgagor also wanted to borrow money but this motive for the transfer would not take it out of the mischief of the section. The section says that if the transfer is made with intent to defeat and delay creditors the transfer is voidable. The existence of this specific fraudulent intention taints the transfer with the vice of voidability by the creditors so defeated or delayed. It does not, in my opinion, matter whether part of the consideration is good, nor does it matter whether part of the motive is good. If it can be said that the transfer was made with the intention of defeating and delaying creditors then the conditions of the first part of Section 53 are established and the transfer becomes voidable by any of the creditors, so defeated or delayed. I realise that a preference of one creditor would not constitute an intention to defeat and delay creditors. That is now well established-see the case in Musahar Sahu v. Hakimrial ('15) 2 AIR 1915 PC 115 -but a mortgage where part of the consideration stated is proved to be fictitious and where this fictitious part of the consideration is put in the bond in order to protect the mortgagor's property from his other creditors is not a mere preference of one creditor over another. It is a transfer made to defeat and delay creditors and by virtue of the provisions of Section 53, T. P. Act, it becomes voidable unless the mortgagee can prove consideration and good faith. Mere proof of consideration is not enough. The section postulates two things: consideration and good faith, and there cannot be any good faith when the mortgagee knows that part of the consideration is fictitious and when he assists the mortgagor in his device to defeat and delay his creditors. In these circumstances even if the plaintiff had succeeded in establishing the antecedent debts I would still have held that the entire mortgage was vitiated by reason of the intention of defeating and delaying the creditors of the mortgagor and that it was voidable in toto. In the circumstances the decision of the learned subordinate Judge must be set aside and the decision of the learned Munsif must be restored. The appeal is allowed. The appellant will get his costs throughout.