Iyyunni and others vs Anto and Others

Viswanatha Iyer, J.—A. S. Na. 227 of 1985 arises out of the judgment and the decree in O. S. NO. 191 of 1981 on the file of the Sub-ordinate Judge of Thrissur. We shall state the facts therein as the other two appeals actually follow in the wake of this decision, We shall refer to the parties in the further discussion, as they are arrayed in the trial court in the smt O. S. NO. 191 of 1981, for the purpose of convenience. A.S. 227 of 1988: Defendants 2 and 4 are the appellants. They are the children of one Mannai alias Mary, her another son, who was the third defendant and the South Indian Bank Limited, Thrissur who was the fifth defendant In the suit.

The suit was one u/s 53 of the Transfer of Property Act, 1882 for a declaration that the deed of sale Ext.A9 (original of which is Ext. B9) dated 5-10-1973 executed by the first defendant in favour of her three sons, defendants 2 to 4 was one executed with Intent to defeat and delay, the creditors of the first defendant, and for other consequential reliefs. The four plaintiffs and 3 their predecessor one Devassy had filed different suits O.S. Nos. 74 and 87 of 1972, 64, 114 & 194 of 1973 against one St. Joseph''s ''Trading Company and its partners, including the first defendant herein for recovery of amounts due to them. The first defendant was the sixth defendant in all those suits. The first suit y Devassy, namsly O. S. NO. 74 of 1972 was filed on 23-5-1972 in which he attached the suit properties herein which belonged to the first defendant on 25-5-1972. It was while the attachment was in fores that the property which bad an extent of 1.09 acres was sold by the firet defendant to defendants 2 to 4 by Ext. B2 dated 5-10-1973 for a consideration of Rs. 12000/- of which Rs 750/- was paid In cash, and the balance was reserved with the vendees for payment to the decree bolder in O.S NO. 74 of 1972, and in case the amount was not payable to the first defendant herself. The other four suits by the plaintiffs herein followed, but without any order of attachment. All these suits were tried jointly and decreed on January 3, 1978.

Two other suits O. S. NO. 3 and 4 of 1973 had been filed by the 5th defendant South Indian Bank Limited against the same firm and its partners for recovery of amounts due to them. Those suits were also decreed.

The decree in O.S.No. 74 of 1972 was put in execution. The suit property was sold and purchased by Davassy, the decree holder himself for Rs 30000/- on 17-12-1980. Before the sale was confirmed, defendants 2 and 4 filed �. A. NO. 36 of 1981 under Order 21 Rule 89 of the C.P.C. to set aside the sale after depositing the decree amount due to Dcvassy under the decree, and poundage. These defendants claimed right to the property under the deed of sale Ext. B2. The petition was allowed by the order Ext, A 8 dated 18-2-1981 and the sale set aside.

The plaintiffs who were the descree holders la the other four suits, namely O. S. Nos. 87 of 1972 and others could not however proceed against the property for realisation of their dus in view of the sale to defendants 2 to 4 by Ext. B2 on 5-10-1973. According to them, they came to know about the sale when they tock out execution of tha respective decrees and the sale in question was put forward as a defence early in January 1981. Thereupon they filed the present suit O. S. No, 191 of 1981 on April 10, 1981 alleging that the tale WAS a fraudulent one intended to defeat and delay the creditors of the first defendant who was also liable under the various decrees as a partner of the Si. Joseph''s Trading Company.

The first defendant in a written statement of her own contested the suit with the plea that the sale was for adequate consideration for the purpose of satisfying the decree, if any, that may be passed in O. S. NO. 74 of 1972. The sale, according to her, was a bona fide one, intended to satisfy the decree in O.S NO. 74 of 1972. She also contended that the suit was barred by limitation as it had been filed more than three years after the date of the sale, namely 5-10-1973.

7 Defendants 2 to 4 in their separate written statements contended likewise and sought dismissal of the suit.

The fifth defendant. Sooth Indian Bank supported the plaintiffs. They had taken steps to execute a decree in O. S. NO. 3 of 1973 when defendants 2 to 4 herein filed a claim E. A. NO. 85 of 1981 putting forth the sale Ext. B2 in their favour and contending that the suit property was not liable to be proceeded against for realisation of the amounts due from St. Joseph''s Trading Company or the first defendant.

9 After trial, the suit O.S NO. 191 of 1981 was decreed on January 14, 1985. The lower court held that the transaction In question by which the only property owned and possessed by the first defendant was sold, was in fraud of creditors, and therefore void u/s 53 of the Transfer of Property Act, 1882. The lower court also held that the suit was not baried by limitation in as much as it had been filed within a period of three years from the date on which the plaintiffs had knowledge of the sale. The suit was accordingly decreed as prayed for with costs. Defendants 2 end 4 have filed the appeal A. S. NO. 227 Of 1985 impleading the plaintiffs and the other defendants in the suit as respondents.

Consequent on this judgment and decree, the claim petition E. A. NO. 85 of 1981 Med by defendants 2 to 4 was dismissed with costs. Defendants 2 and 4 have Tiled the'' appeal E F A NO. 5 of 1985 Impleading the decree holder South Indian Bank Ltd., transferor Mannal alias Mary and the third defendant as respondents thereto.

On the filing of O. S. NO. 191 of 1981, the plaintiffs had sought for and obtained an order of attachment of the suit property. After the suit was decreed and the claim petitton of defendants 2 to 4 was dismissed,'' the South Indian Bank proceeded with the execution of the decree and the property was sold on 15r2-1986 and purchased by one Rosily, the wife of the second defendant for a price of Ra. 1051 lakhs. The plaintiffs who had no notice of the execution proceedings filed the application E. A. No, 156 of 1986 to set aside the sale under Order 21 Rule 90 of the C. P. C. on the ground that it was vitiated by fraud and irregularity. According to them the property was worth about Rs. three lakhs, that it had been sold only for 1,05,100/- and that such a low price was fetched oily because of the fraud and collusion between the paries. Inter alia, they pointed out that the sab proclamation did not mention about the attachment which they had obtained in O. S. NO. 191 of 1981, and therefore the salp had proceeded as if there was no encumbrance on the property.

This, they seated, was a material irregularity in the conduct of the sale, which vitiated it.

The lower court accepted this contention and set aside the sale. Since the plaintiffs had expressed their willingness to pay the amount of the decree due to the South Indian Bank, the lower court permitted tham to do so within one month. This order dated 25th September, 1986 setting aside the sale is challenged by Rosily the auction purchaser by filing G. MA. NO. 210 of 1986. It is in these circumstances that the three appeals are before us.

We may deal with C. M. A. NO. 210 of 1986 in the first instance in as much as any decision/therein adverse to the plaintiffs wilt have the effect of rendering O.S NO. 191 of 1981 and the appeal therefrom A. S. NO. 227 of 1985 virtually infructuoua. As mentioned earlier, we shall be referring to the parties with reference to their array in the suit O. S. NO. 191 of 1981, as done by us in the earlier part of this judgment, referring to the appellant in the Civil Miscellaneous Appeal as the auction purchaser.

The lower court has allowed the application for setting aside the sale for two reasons, firstly on the ground that the non-mention of the attachment in O. S. No, 191 of 1981 in the Sale proclamation vitiated it as a material irregularity, and secondly on the ground that the property worth about Rs. three lakhs has been sold for a low,amount of Rs. 1,05,100/-. So far as the latter aspact is concerned, it has to be mentioned that apart from the assertion, that the value of the property will be about Rs, three lakhs, there is no evidence on record to show that its price would have been that much at the time of the sale. No commission was issued, and no evidence was tendered about the value of the property. We have only the ipse dixit of the plaintiffs that the value of the property would be Rs. three lakhs and that the price of Rs. 1,05,100/- fetched at the sale was grossly low. Apart from this circumstance, It must also be mentioned that more inadequacy of the price is not a ground for setting aside a court sale, unless it bad been caused by the fraud or irregularity in the publishing and conduct of the sale. We are not therefore quite impressed with the second ground stated by the lower court, of inadequacy of the price fetched at the sate, particularly in the absence of any finding that the alleged low price was related go any fraud or irregularity of the nature mentioned in Order 21 Rule 90 of the C. P. C.

We shall now consider the other ground relied on by the lower court, namely that the non - mention of the attachment in O. S. NO. 191 of 1981 in the proclamation of sale is a material irregularity vitiating the sale. There is no dispute that the attachment was not mentioned in the proclamation of sale. But then, Smt. Elizabeth Mathal Idiculla, counsel for the appellant auction pntchaser submits that it was not one of those Particulars required by Order 21 Rule 66(3) to be mentioned in the proclamation of sale, and that, in any event, the non - mention thereof has not caused any substantial injury to the plaintiffs justifying the sale being set aside under Order 21 Rule 90 of the C. P. C. In particular, she points out that while clause (c) of sub rule (2) of rule 66 requires any, encumbrance to which the property is liable to be specified, the rule does not insist on particulars of attachments to be mentioned. She submits that even clause (e) of the sob-rule does not import such a requirement, the existence or otherwise of an attachment, baring no effect on the nature or value of the property. She refors to the decisions in Ayya v. Parasmal 1982 (1) Kaanataka Law Journal 130, Durga Prasad Shraff Vs. Mahadeb Lal Singhania and Others, and Tbiruverklta ''Reddlar T. Noordeen, 1977 K. L. T, 877 In support of her submissions.

In Durga Prasad Shraff Vs. Mahadeb Lal Singhania and Others, a Division Bench of the Patrfa High Court noted that an attachment does not create any title; and that it is not an encumbrance or a charge on the property liable to bo specified in the proclamation of sale -under Order 21 Rule 66 (2). Its non-mention in the proclamation is not therefore a material irregularity vitiating- the sals. The same view was taken in Ayyas'' case, 1982 (1) Karaataka Law Journal 130.

We are in agreement with the aforesaid view. An attachment only interdicts any private transfer or delivery of the property or of any interest thereon. It does not create any eaeumbrance on the property. Since an attachment only prohibits private transfer or delivery of the property, it does not prevent an involuntary sale (Thiravenkita Reddlar v. Noordeea, 1977 K. L. T. 877, Rukhmani v. Ratnsaroop, AIR,1944 Nag. 324, Mutha Subbarao and Others Vs. The Official Receiver, West Godawari at Eluru and Others, . The attachment has therefore no relevance so far as a court sale is concerned and is not a material particular, required to be mentioned in the proclamation of sale. We are therefore of the opinion that the non-mention of the attachment effected in O. S, NO. 191 of 1981 in the proclamation of sale was not a material Irregularity vitiating the court sale. 19. Even otherwise, a sale can be set aside only if the material Irregularity or fraud has caused substantial Injury to the applicant, this being a requirement prescribed by sub-rule (2) of rule 90. This requirement is not satisfied in this case. The requirements of sub-rules (1) and (2) of rule 90 are cumulative and all of them have to be satisfied before, a sale can be set aside under this, provision. It was therefore necessary, for the applicants - plaintiffs, to establish that they had sustained substantia injury by reason of the non-mention of the attachment in the proclamation of sale.

Even otherwise, a sale can be set aside only if the material Irregularlty or fraud has caused substantial injury to the applicant, this being arequirement prescribed by sub-rule (2) of rule 90. This requiredment is not satisfied in this case. The requirement of sub-rule (1) and (2) of rule 90 are cumulative and all of them have to be satsfied before a sale can be set aside under this provision. It was therefore necesary for the applicants - plantiffis to establish that they had sustained substantia injury reason of the non-mention of the attachment In the prociamation of sale.

The existence of the attachment in O. S. NO. 191 of 1981 did not prevent the tale of the property in execution of the decree in O. S. NO. 3 of 1973, The property could be sold in execution Irrespectivo of the attachment in as much as a sale in execution, is not interdicted by an attachment. The existence of the attachment in O S. NO. 191 of 1981 was not therefore a material detail whieh could affect ci;hcr the validity of the sale, the value of the property or the price fetched at the sale. The non-men''ion of the attachment in the proclamation of sale could not therefore cause any Injury to the applicants, much less any substantial injury as to bring the case within the purview of sub-rule (2) of rule 90.

We have already mentioned that the lower court proceeded on the basis, without anything more, that the non-mention of the attachment is an irregularity. We have held otherwise. If there is no irregularity in the publishing or conduct of the sale and in any case, there was no substantfil injury caused ''o the applicants by reason of the alleged irregularity, the sale cannot be set aside under Order 21 rule 90. The lower court has wrongly set aside the sale held on 15-2-1986. The order of the lower court is liable to be set aside and the sale has to be confirmed, in the absence of any other reason against its confirmation. We accordingly allow C. M. A. NO. 210 of 1986.

In the light,of the above decision, the question of deciding the other two appeals on the merits does not really arise. Both of them have really become infmctuous in as much as the property has passed on to the auction purchaser and nothing remains with defendants 2 to 4 or the first defendant, to be proceeded against. We shall however deal with these appeals briefly on the merits, AS. NO. 227 of 1985 in the first instance, as the order impugned in E. F. A. NO. 5 of 1985 is only an order passed consequent on the decision in O. S. NO. 191 of 1981.

We shall deal with the question of limitation in the first instance. The sale was on 5-10-1973. The suit was filed on Ap.il 10, 1981, more than three years from the date of the sale. Defendants 1 to 4 contend that the suit is barrod by limitation as ac:ording to them the three years period for filing the suit runs from the date of the sale, and not from the date of knowledge thereof, as contended by the plaintiffs and as accepted by the lower court. According to the plaintiffs, they came to know of the sale early in January, 1981, when it was put forward for the first time by defendants 2 to 4, The suit was filed soon thereafter. The position is well established that a sout u/s 53T.''P. Act, is governed by Article 113 of the Limitation Act, 1963 (corresponding to Article 120 of the 1908 Act)- vide State Bank of Travancore Vs. A.K. Nanan and Another, and Tharu Cheru v. Maty, 1973 K. L. T. 31. The question is when the right to sue accrues and time begins to run. The natter was considered elaborately by a Division Bench of the Bombay High Court in Abdallakban v. Purushottam, AIR 1948 Bombay 265. Gajendragadkar, J. speaking for the Bench relied heavily on the decisions in AIR 1930 270 (Privy Council) , AIR 1931 9 (Privy Council) and O. Rm. O.M. Sp. Firm vs. P.L.N.K.M. Nagappa Chettiar and held that limitation for a suit u/s 53 of the Transfer of Property Act commences when the plaintiff had knowledge of the fraudulent transfer and not from the date on which the Plaintiff decides to exercise option of avoiding it. He observed:

It must now be taken to be settled that in regard to suits falling under Art. 120 the right to sua cannot accrue until the right asserted is Infringed or unequivocally threatened, and incases where the right is based upon an allegation of fraud, limitation cannot commence unless the party asserting the right had knowledge of the said fraud. it is obvious that under S.53, T. P. Act, creditors can impeach only such transfers as are intended by the debtor to defeat or delay his creditors. the right to sue accrues not only because the creditor is defeated or delayed, but because he is defeated or delayed owing to a fraudulent transfer.

In Ahmed Ali Khan Bahadur (died) and Another Vs. Banguluru Veeralla and Others, , the High Court of Andhra Pradesh held clearly that the cause of action for such a suit does not arise on the date of the alienation, but on the date when the creditor who seeks to set aside the alienation knows that he has been defrauded, defeated or delayed (See also Marteaadu Rao v, Cheans Basappa AIR 1951 Mad.388). Having regard to this consistent line of decisions with which we are in respectful agreement, it has to be held that the salt filed on April 10, 1981 was In time.

The further question whether the sale Ext B2 is hit by Section 53of the Transfer of Property Act has been discussed in detail by the lower court and it has been held that it was one intended to defeat and delay the creditors of the first defendant. We are in agreement with this conclusion, the reasons for which we shall state. The transfer was by the first defendant mother to her three sons defendants 2 to 4, who. it is in evidence, were all staying with her. This was at a time when the suits had been filed against the first defendant by Devassy and others and the fifth defendant, for recovery of the amounts due to them from the St. Joseph''s Trading Company. The first defendant cannot pretend Ignorance of the existence of the dues of the said firm,. of which she van a partner, and la respect of which the suits had already been filed No explanation is forthcoming as to why the sale had to be effected at this juncture in favour of the sons, who were ail staying with the first defendant. Even if it was a question of making arrangements for payment to Devassy the plaintiff in O.S. NO. 74 of 1972, it is not disclosed why a sale was necessary and that too, of all the properties owned and possessed by the first defendant, having regard to the close relationship between the parties and their living together. It is also noteworthy that though the consideration was stated to be Rs. 12,000/-only Rs 750/- was paid, and the balance was reserved with the sons defendants 2 to 4, to be paid to the decree holder and if it was not payable, to be paid to the first defendant herself at that stage. But it is again significant that the balance amount of Rs. 11250/- did not carry ''any interest, if it was payable to the first defendant. The sale was not disclosed when the execution proceedings for sale of this property were taken by the decree holder D. vassy in O. S. NO. 74 of 1972. The properly was solid in court auction and it was only thereafter that defendants 2 to 4 came forward with their application E.A. NO. 36 of 1981 on the basis of Ext. B2, depositing the decree amount and poundage. In other words, even the amount due to Devassy was paid only long afterwards, after over seven years from the sale and even after about three years from the date of decree, namely 3-1-1978. There is no case for the defendants, despite their pretence of igootance of the dues of the St. Joseph''s Trading Company - which we find it difficult to accept - that any enquiry was made by any of these defendants about the liabilities of that firm. In fact, the second defendant as D.W. 2 admitted that no such enquiries bad been made. This really strikes at the root of he bona fides of both the transferor and the transferee. The first tax payment after the transfer so far as it is in evidence, is only on 10-8-1977, about lour years later, The value of the property at the time of Ext. B2 is not in evidence, but it is a fact that all the immovable assets of the first defendant stood transferred by that sale.

The cumulative effect of these circumstances, particularly the close relationship between the parties and the sale having been effected '' admittedly for payment of a deb: (which according to the defendants may or may cot arise) in the future, is to lead to the inference that the sale was one intended to screen the property from the creditors who had already filed their suits, and to defeat and delay them. The non-examination of the first defendant and the absence of any explanation for the necessity for a sale to the children to discharge a debt on a long future date are also pointers in this direction. We have therefore no hesitation in holding that the sale Ext. B2 was one intended to defeat and delay the creditors of the first defendant.

The principle of the decision in Rajeswari & Co. v. Union of India, AIR,973 Mad 222 which was affirmed in Union of India (UOI) Vs. Rajeswari and Co. and Others, relied oa by the defendants does not apply to the facts of this case. In that case, the traasfers were in anticipation of some possible claims that may be made by the Union of India on the reopening of an assessment to income tax for which proceedings had already been initiated, with the debtor discharging all his dttrs with the proceeds of the transfers. It was in evidence that one of the main objects of the sales was to pay off those debts. In those circumstances, the Madaras H''gh Court salvaged the transfers on the ground that that was a Case where the debtor had only preferred his other creditors to the Union, which he was entitled to do, wheie no consideration of bankruptcy or Insolvency arose. That is not the case here where the sale was at best to pay off one of the many creditors and that too in the distant future. We are- therefore at one with the lower court in holding that the transection Ext. B2 was one intended to defeat and delay the creditors of the first defendant, that defendants 2 to 4 are not bona fide transferees and that therefore it is liable to be avoided at the option of the plaintiffs. The suit O.S NO. 191 of 1981 was rightly decreed by the lower court. E.A.No.85 of 1981 was also therefore rightly dismissed.

But this is not going to be of any benefit to the plaintiffs as we indicated earlier, as the property has subsequently been sold in court auction and purchased by Rosily. No doubt she is the wife of the second defendant, but that is of no assistance to the plaintiffs to proceed against the property. Though the plaintiffs have succeeded in their suit they are in effect having only the shadow of success. It was mentioned that the plaintiffs could claim benefit of ratable distribution u/s 73 of the C.P.C. It is for them to claim sit If the requisite conditions are satisfied. We are not expressing any -opinion on the point.

C.M.A.No.210 of 1986 is allowed and E A No 154 of 1986. Sub Court Thrissur Is dismissed. The parties will suffer their respective costs in this appeal. A.S.No 227 of 1985 and EF.ANo.5 of 1985 are both dismissed with costs.