J. China Pitchiah vs T. Pedakotiah and Others

Sundara Ayyar, J.—This is a suit by the plaintiff to recover the amount due on a mortgage bond, executed to him by the first defendant by

the sale of the mortgaged property. The question raised in the second appeal is whether the third defendant, who obtained a decree against the first

defendant for money, is entitled to impeach the mortgage as altogether fraudulent and unenforceable. The finding of the Lower Appellate Court is

that the mortgage was supported by consideration only to the extent of Rs. 1,055-5-6 and that the remainder of the consideration recited in the

bond was not paid. The appellate court gave plaintiff a decree for the amount which was actually paid and held the mortgage not to be valid for the

remainder of the amount. The Subordinate Judge observes in his judgment that at the time of the mortgage the first defendant was unable to pay his

debts in full. Mr. Nagabhushanam for the third defendant appellant contends that, a portion of the consideration for the mortgage bond being

fictitious the whole document ought to be considered to be fraudulent, against the creditors of the first defendant including the third defendant. I am

unable to agree with this proposition. A mortgage in so far as it is executed for the purpose of paying off a debt really due by the mortgagor could

not defeat the creditors of the mortgagor. No doubt, the mortgage would give preference to the debt due to the mortgagee. But such preference

does not come within the mischief of Section 53 of the Transfer of Property Act. It is difficult to see how a charge created for discharging a real

debt can be taken to be one defeating the creditors of the debtor as a body. To the extent, therefore, that the mortgage bond was supported by a

debt actually due prior to the date of the instrument, it must, in my opinion, be upheld. I am far from laying down a proposition to the effect that it is

enough for every kind of alienee to prove that his transaction is supported by consideration to show that it is not within the mischief of Section 53

of the Transfer of Property Act. In the case of a sale adequate consideration might pass from the vendee to the vendor, but the object might still be

to defeat the creditors of the vendor by converting his Immovable property into cash which he would be able to use for his own purpose and to put

the property previously available to his creditors practically beyond their reach. It is also possible that a mortgage giving a term of enjoyment of the

mortgaged properties to the mortgagee might be fraudulent as against creditors though supported by consideration partially. Again a sale supported

by consideration might be regarded as invalid against creditors, if the consideration be utterly inadequate. The debtor might be actuated by the

malicious desire of defeating his creditors partially by selling his property for a low price. The present case, however, does not come within any of

these classes of cases. The plaintiff''s claim is only that of a simple mortgagee and his suit is simply to recover his money. The fact that the mortgage

is for an amount larger than he really paid can be no reason for not upholding it to the extent that it is supported by a debt existing at the date of the

mortgage. Mr. Nagabhushanam has referred me to a case reported in Chidambaram Chettiar v. Sami Aiyar I.L.R., (1907) Mad., 6, but I am of

opinion that that case does not support him, though it does affirm the proposition that where a debtor attempts to screen his property from his

creditors by converting the nature of his property so as to make it practically unavailable to his creditors the transaction would be one prohibited

by Section 53 of the Transfer of Property Act. An examination of the case in Ishan Chunder Das Sarkar v. Bishu Sardar I.L.R., (1897) Calc., 825

shows that this is the real principle underlying the cases which lay down that a transaction may be wholly invalid where a part of the consideration is

fictitious. I must reject this second appeal.

Mr. Nagabhushanam says that though the judgment of the Lower Appellate Court allows proportionate costs to both sides, the decree does not

carry out this direction and that there is an error in it. This matter may be rectified by an application made for the purpose. The rejection of this

second appeal will be without prejudice to any steps that the appellant may be advised to take for that purpose.