Errachi Reddier and Another vs Vellaya Reddier

The plaintiffs, who have failed in both the Courts below are the appellants in this second appeal. The claim relates to the plaintiffs title and right

to the possession of the suit land, an extent of 3.47 cents of punja in survey field No. 162/1 B, Chinnareddipatti village, hamlet of Porundalure,

Kulitalai Taluk, Tiruchirapalli Dt. They prayed for the relief of declaration of there title and for a permanent injuction restraining the defendant, from

interfering with there possession, if the Court should find that the plaintiff are not in possession.

The suit land admittedly belong to one Lavunga Reddi against whom his creditor one Kundan Chetti (D.W. 1) filed the suit O. S. 362 of 1950

on the file of then District Munsif Court, Kulitalai, for the recovery of a sum of Rs. 1454, for principle and interest due on promissory notes.

Kundan Chetti obtained an attachment before judgment of several properties belonging to Lavunga Reddi including the suit property on 16-7-

1950 and on 23-8-1950 the attachment was made absolute. A decree was given in the suit on 30-1-1951 and the first execution petition E. P.

214 of 1953 was filed on 6-4-1953 seeking execution of the decree by sale of the suit property and other properties that had been attached

before judgment.

Pending the execution, the judgment-debtor Lavunga Reddi died and his widow Pappathiammal was brought on record as a legal representative

and execution continued. At the sale had on 25-11-1953, there were no bidders and the execution was adjourned ''for steps'' in a week. Twelve

items of properties had been attached before judgment and were sought to be proceed against in execution. While the sale thus stood adjourned

on 5-12-1953 the Madras Indebted Agriculturists (Temporary Relief) Ordinance V of 1953 came to be made. On 7-12-1953, the execution

petition was closed with the following observations: ""No steps taken. Petition closed. Attachment to continue for two months"". Clearly the

plaintiffs, the decree-holders could take no steps then. The Act applied to the debt in question and in the Courts below, it was not seriously

disputed that the execution petition came to be closed because of the coming into force of Ordinance V of 1953.

Now, meanwhile on 30-11-1953, the plaintiffs purchased the suit and certain other properties from the judgment debtor''s widow Papathiammal

alias Naravi under Ex. A-1 for consideration of Rs. 2000, Rs. 1900 out of this consideration went in discharge of debts due to the second plaintiff

by Lavunga Reddi, the deceased, as evidence of promissory notes. The balance of Rs. 100 alone was taken in cash by the for her family expenses.

It may be stated that both of the Courts below find that the consideration for the sale deed passed in the manner above set out and sale was fully

supported by consideration. Except for the sum of Rs. 100 the sale was in discharge of the debts due by the deceased judgment debtor and only a

cash of Rs. 100 passed under the transaction to the judgment debtor''s widow as the vendor.

Kandan Chetti, the decreeholder in O. S. 362 of 1950 after the period of the ban imposed under the Ordinance V of 1953, followed up by

Madras Act V of 1954 and Act I of 1955, continued the execution reattached the properties and bringing them to sale. The respondent herein, the

defendant in the suit, out of which this second appeal arises, purchased the suit property in Court auction on 30-1-1957 in E. P. 377 of 1955. The

sale was duly confirmed and Ex. B-8 dated 29-3-1957 is the sale certificate issued in the favour of the defendant. The defendant proceed to take

delivery of the suit property in execution of his decree and Ex. B-11 is the delivery receipt for delivery of the property in execution on 30-7-1967.

The plaintiffs live above 12 miles away from the suit land and it is their case that they were not aware of the alleged attachment or the auction

proceedings taken by the decree-holder Kundan Chetti. It is stated for them that they become aware of the auction sale just before suit and they

filed the suit on 30-11-1959. Admittedly there was no claim on the attachment or any recorded obstruction to the delivery. The question for

determination in the circumstances is as to the title to the properties.

(2) The plaintiffs'' purchase was pending an attachment. There had been an attachment before judgment and in E. P. No. 214 of 1953, execution

was sought by sale of the properties referring to the attachment before judgment, which had become absolute on 30-11-1953. On 7-12-1953, the

Court had, while closing the execution petition, directed that the attachment should continue for two months, that is, the attachment in terms of

order would expired on 6-2-1954. The execution petition E. P. No. 377 of 1955 under which the sale of the suit property was held was filed on

14-9-1955 and there was attachment of the immovables thereunder on 19-10-1955. The suit property was purchased by the defendant in this

execution petition on 30-1-1957 for a sum of Rs. 500. The plaintiffs had purchased the same property with some other properties on 30-11-1953

for a sum of Rs. 2,000. Ex facie, the attachment pending which the property was purchased by the plaintiffs had ceased in February 1954 and the

defendant''s purchase was under an attachment made in 1955. It in contended for the plaintiff that they were bona fide purchasers of the property

for valuable consideration unaware of the involved circumstances of their vendor''s husband, nearly the entirely of the consideration went in

discharge of debts due to them and there was nothing fraudulent about the transfer in their favour. They contend that Sec. 64, C. P. Code, Cannot

Help the defendant in this case, as his sale is under a different attachment and the original attachment and the ceased in February 1954 itself.

The defendant sought to maintain his title to the property under to heads. It was contended that the sale was subsequent to 1-10-1953 and was hit

by the Ordinance and Acts above referred to. It was a sale in fraud of creditors by an agriculturist debtor. Secondly it was contended that the

original attachment in this case was an attachment before judgment and notwithstanding the order made by the Court on 7-12-1953 when closing

the execution that the attachment was to continue for two months, the attachment in law is continued right through. Learned counsel contends that

an attachment before judgment, unless it be a case of dismissal of the execution petition for default on the part of decree-holder, would continue to

subsist till discharge of the decree by sale of properties. The Courts below have found for the defendant under both the heads and have dismissed

the suit negativing the title of the plaintiffs to the property.

(3) Mr. Venkatachari, for the plaintiffs, the appellants in the second appeal, attacked the decision of the Court below as unsound and untenable

under both the heads. For his contention, that the order closing the execution petition having specifically provided the period during which alone the

attachment was to subsist, Notwithstanding the fact that the original attachment was an attachment before judgment the attachment has ceased with

the expiry of the period specified, learned counsel relied on the decision in Kuppuswami and Another Vs. Rangai Goundan, . The decision does

clearly support the learned counsel for the appellants. However, Mr. K.S. Champakesa Aiyangar for the defendant strenuously contends that

when a dismissal of execution petition is not any default on the part of the decree-holder, it can never cease till sale or satisfaction of the decree

and that was the position in law on the authorities, notwithstanding an order of Court fixing a time-limit for subsistence of the attachment. The

contention raised by the learned counsel for the respondent, whom I have heard for sometime, I find requires careful consideration. In the view, I

take of the other hand of defence, I do not propose to go into this question at this stage.

(4) The other head of defence, that the sale in fraud of creditors and voidable under S. 53 of the Transfer of Property Act, is normally a question

of fact. But unfortunately, the Courts below and particularly the lower Appellate Court, the final Court of fact, had failed to address themselves to

material evidence on record in regard to the essential ingredients for holding a transfer as fraudulent, that is, a transfer made with intent to defeat or

delay creditors. Reference is made by the Court below to S. 7 of Madras Act I of 1955, which raises a presumption that every transfer of

immovable property made by the debtor entitled to the benefit of the Act till the complete discharge of his debt shall be presumed until the contrary

is proved to have been made with intent to defeat or delay the creditors of the transferor. But the plaintiffs have pleaded that they are transferees in

good faith and for consideration and they have let in evidence on this aspect of this case. Sec. 53(1) specifically provides that nothing in the sub-

section shall impair the rights of a transferee in good faith and for consideration. The plaintiffs are themselves creditor of the agriculturist debtor and

out of the consideration of Rs. 2,000, Rs. 1,900 was in discharge of debts due to them and only Rs. 100 was paid in cash. The lower Court for

there conclusion make reference to the decision of this Court in Abdul Majid Lebbai Vs. Papathi Ammal and Another, . They failed to appreciate

that it was a case where on the fact the transferee appeared to have shared the fraudulent intent of the transferor. The learned District Judge, after

referring to the above case simply remarks thus:

In the present case under Ex. A-1 the vendor has received Rs. 100. She has retained this amount for herself. She has not utilise it to discharge the

debts due to her husband''s creditor.

With these observations, it was held that the case immediately cited above applied and that the sale Ex. A-1 is in fraud of creditors of the

deceased.

(5) Now Sec. 7 of the Act I of 1955 does not make every transfer of immovable property made by agriculturist debtor pending the moratorium

period, a transfer in fraud of creditors. It only raises a presumption in favour of the attaching creditor. The presumption is rebuttable presumption.

It contemplates transfers being validly made and does not prohibits transfers in general during the period. If the presumption stands unrebutted,

then the consequences found in S. 53 of the Transfer of Property Act follow. The sale is voidable by the creditors. The effect of S. 7 is to throw

the burden S. 53 of the Transfer of Property, effectively on the transferor and the transferee. If, notwithstanding the presumption that is raised in

favour of the creditor by reason of S. 7, the transferee establishes that he is a transferee in good faith and for consideration, his transfer cannot be

avoided.

Again, S. 7 only raises a presumption that a transfer has been made with intent of defraud or delay creditors of the transferors. If the evidence

let in warrants the inference having due regard to the burden that the transferor could not have in making in the transfer intended to defeat or delay

creditors, the transaction has to be upheld and cannot be impugned. Again, the transfer may stand established as a case of preference of one

creditor. In all cases the presumption would stand rebutted.

Under the Transfer of Property Act, the onus of proof, when a transfer is alleged to be in fraud of creditors, is left to the general law of

evidence. The effect of S. 7 of act I of 1955 is only to indicate the burden and place it squarely on the transferee. For a transfer to fall under S. 53

of the Transfer of Property Act, the intention must be to defeat or delay creditors generally and not preference of one creditor to another. The

transfer must be one which removes property from the creditors to the benefit of the debtor. The intention in the transfer should not be for the

debtor to reserve a benefit to himself. If the debtor sells property to another creditor in discharge of debts due to him, but it is found that the price

realised is considerably in excess of the debt to be discharge, it will be a fair inference that there was an intention to defraud creditors while

preferring one.

As one of the essential ingredients for invalidating a transfer under S. 53 of the Transfer of Property Act is a fraudulent intention to defeat or

delay creditors, the intention has to be found. A man is presumed to intend the natural and normal consequence of his acts. The intention with

reference to the particular act must be judge only from the consequences of the act in the background of the surrounding circumstances. If the

effect of a sale is necessarily to leave in the hands of the transferor, a large amount of cash, which could have been avoided by sale of lesser extant,

an inference of fraudulent intent may follow.

Equally, if the cash left in the hands of the vendor is unsubstantial and could not have been avoided having regard to the property available for

sale and the sale is prudent one, fraudulent intent is not a necessary deduction from the mere fact that the transferor had received some cash.

Again, in all these cases for S. 53 of the Transfer of Property Act to apply, the transferee must share the fraudulent intent. He must help the

transferor in his intention of securing the cash to himself to the detriment of other creditors. The question essentially is a matter for inference from all

the circumstances of the case; but for a finding in this regard to have a finality as a finding of fact is the Court of fact must bear in mind that the

ingredients that are required to vitiate a transfer under the provision. If the transfer has other properties available for meeting the demand of his

creditors, an inference to defeat the creditor by sale of single item is rebutted.

I shall give anther illustration where the mere fact that some cash received by the transferor cannot vitiate the transfer. Suppose there is an item

of property worth one lakh of rupees, the debtor may have other items of properties and when he is involved in debts, a creditor to whom Rs.

90,000 is due, presses for discharge of his debt and to avoid Court auction and the consequential heavy litigation costs, the debtor sells the item of

property for one lakh. It is proper and fair price and the debtor receives Rs. 10,000 in hand, the obligation being his to bear the stamp, registration

and legal charges in regard to the transaction. True, the sum of Rs. 10,000 which he receives in cash he receives it for his benefit. He receives it to

meet his obligation of completing the sale by a duly registered instrument. He certainly gets the benefit of the cash received in this way. Can it be

said in this case that because he has received a sum of Rs. 10,000 in cash and that is a benefit to him, the sale was in fraud of creditor. The

property could not be sold for less or more. Here the transferor''s object in receiving the cash was not to benefit himself at the expense of his

creditors. May be, that the entire sum of Rs. 10,000 may not get utilised in legal charges. A sum of Rs. 500 or Rs. 1,000 may be left in his hands

at the close of the transaction. Are we to say in such a case that the transfer is with intent to defraud creditors and that the transferee has shared the

transferor''s intent and help him to defeate and delay creditors? This is an extreme case but I am giving it as an illustration to point out that each

case has to be decide on its own facts, having regard to all the surrounding circumstances. Mere receipt of some cash without more cannot vitiate a

transfer. To do a thing with intent is to do it, having the mind or attention firmly directed or fixed on the thing. When we speak of intention, we

mean the fixed direction of mind towards a particular object, a determination to do a specified thing or to act in particular manner. The ultimate

object or purpose of an act is the intention.

The Court below have failed to examine the present case in the light if the above priciples. They simply proceeded to apply the decision of this

Court in Abdul Majid Lebbai Vs. Papathi Ammal and Another, without adverting to the facts of that case and examining the facts of the present

case. In that case not only did transferor retain some cash under the transaction, but as pointed out by Ramkrishnan, J. in Chinnia Padayachi v.

Abdul Jalil Rowther S. A. No. 317 of 1961 (Mad.), it would appear from the judgment that the transferor was not shown typo have possessed

any property other than the alienated property. Also, it was a case where the transferee appears to have shared the fraudulent intent of the

transferor. That case is clearly distinguishable on facts. In the circumstances, the lower Courts not having examined the case of the plaintiffs from

the proper angle, the finding that the sale u/s 7 of Act I of 1955 read with Sec. 53 of the Transfer of Property Act has to be set aside. before it

could be found that the plaintiffs are barred from relying on the sale in their favour, it must be found that they had failed to discharged the burden on

them of establishing that they arc transferees in good and for consideration. It must be found, that they have failed to establish their bona fides, that

they were not aware of the involved circumstances of the transferor and that they had not shared the fraudulent intent, if any, of the transferor. And

it must be found that they have failed to establish that it was not intended by the transfer to defeat or delay the creditors of the estate.

It is needless to recount here the various tests which have been laid in case-law to hold that a transfer is in fraud of creditors, intended to

defeate or delay creditors. As pointed out more than once, the evidence on record in the case has not been examined to find whether it would

warrant an inference in favour of the plaintiffs having regard to the statutory presumption in favour of the attaching creditor found in Section 7 of the

Act I of 1955. This is not a case where it can be said that there was no evidence for the plaintiff which could be considered in rebuttal of the

statutory presumption. There is a evidence of record. But it has not been adverted to or considered by the Courts below. Whether the evidence is

sufficient to rebut the presumption is quite a different matter. I am not that. It is for the Court to examine the position. In my view, the interest of

justice required that the case must be sent back to the lower Appellate Court for a clear finding whether the transfer is one that falls u/s 53 of the

Transfer of Property Act, examining the question in the light of the principles above enunciated. I may repeat that the Court will have to bear in

mind the statutory presumption u/s 7 of Act I of 1955, but it being a rebuttable presumption, the Court will have to consider whether the

presumption has been rebutted.

I, therefore, set aside the finding of the learned District Judge on the second point he has set before himself for consideration in the appeal

before him and send the matter to the District Judge, Tiruchirapalli, for a fresh finding on the question on the evidence on record. Time for

submission of finding is four weeks after the reopening of the district Court after summer recess of that Court. Objections, if any, to the findings

within ten days after the receipt of the finding in this Court.

Case remanded.