Madina Bibi Sahiba vs The Ismail Durga Association and Another

Alfred Henry Lionel Leach, C.J.—The appellant is the wife of the second respondent. In 1931 the respondent association obtained two

money decrees against the second respondent for an aggregate sum of Rs. 894. In 1934, in execution of these decrees the association attached

five houses in Madura as property belonging to the judgment-debtor. The appellant objected to the attachment and her objection was successful.

The appellant claimed title to the houses and other properties under a deed of sale executed in her favour by her husband on the 16th of

September, 1932. As the result of the removal of the attachment the association filed in the Court of the Subordinate judge of Madura the suit out

of which this appeal arises for a declaration that the deed of sale was executed in fraud of creditors ""nominally and colourably"". In the meantime the

second respondent had been adjudicated an insolvent and permission of the Official Receiver was sought, and granted, for the institution of the suit.

The association, however, did not apply for an order under the provisions of Order 1, Rule 8 of the CPC permitting it to sue on behalf of all the

creditors and in spite of objection proceeded with the suit for its own benefit and not for the benefit of the creditors generally. The association

based its claim for the relief on two grounds. In the first place it said that the transaction was a sham and in the second place that the transfer was a

fraudulent transaction, entered into with a view to defeat and delay the creditors. The alleged consideration for the sale-deed was a sum of Rs.

10,000. The Subordinate Judge held that the transaction was not a nominal one as the appellant had given consideration to the extent of Rs. 8,000,

but he considered that the transaction constituted a fraud on the creditors as the properties were worth Rs. 18,000. In accordance with this finding

he granted the association a declaration that the sale-deed was invalid, being a fraud on the creditors, and directed that it be annulled. He also

vacated the order passed in favour of the appellant in the execution proceedings, but allowed her to rank as a creditor of her husband to the extent

of the Rs. 8,000 which she had paid.

The appellant has persisted in her contention that the suit as framed did not lie and she disputes the finding of the Subordinate Judge that the

transaction was a fraud on the creditors. If her first contention is sound, it will not be, necessary for the Court to consider the merits of the case.

The appellant says that it was incumbent upon the association to sue on behalf of itself and all the other creditors of the second respondent and

relies on the provisions of Section 53 of the Transfer of Property Act. That section says that every transfer of immovable property, made with

intent to defeat or delay the creditors of the transferor, shall be voidable at the option of any creditor so defeated or delayed. By the Transfer of

Property (Amendment) Act, 1929, the following provision was-added to the section:

A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to and a transfer

on the ground that it has been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of or for the benefit of,

all the creditors.

The appellant says that as this provision has not been complied with the suit must fail. On the other hand the association says that Order 21,

Rule 63 of the CPC gives to a decree-holder whose attachment has been disallowed the right to have the question decided by suit and the rule

must be read entirely independent of the provisions of Section 53 of the Transfer of Property Act.

The suit clearly falls within the purview of Section 53 of the Transfer of Property Act. It is not a suit merely for a declaration that the transaction

Js a bogus one but a suit in which the association also seeks to have the transaction set aside on the footing that it is a fraud on the creditors. The

association, accepts this, and does not challenge the finding of the Subordinate Judge that consideration passed from the wife to the husband to the

extent of Rs. 8,000. As the suit admittedly falls within Section 53, it can only be maintained if the association has obtained the permission of the

Court under Order 1, Rule 8 of the CPC to sue on behalf of all the creditors. The words ""on behalf of, or for the benefit of, all the creditors"" in

Section 53 of the Transfer of Property Act are taken from Order 1, Rule 8 of the Code of Civil Procedure, which provides that where there are

numerous persons having the same interest in one suit, one or more of them may, with the permission of the Court, sue pr be sued, or defend on

behalf of or for the benefit of all persons interested. If a suit has to be brought in a representative capacity, it can only be maintained when it has

been instituted in compliance with the provisions of this rule. This was laid down by the Privy Council in Kumaravelu Chettiar v. Ramaswami Aiyar

(1933) 65 M.L.J. 87 : L.R. 60 IndAp 278 : ILR 56 Mad. 657 .

Before Section 53 of the Transfer of Property Act was amended, there was a conflict in India on the question whether a decree-holder, who

was compelled to file a suit as the result of a successful objection to the attachment, was compelled to sue on behalf of himself and all the other

creditors. This Court was of opinion that it was not necessary for him to sue in a representative capacity. See Pokker v. Kunhamad (1918) 36

M.L.J. 231 : ILR 42 Mad. 143 and N.N.L. Ramaswami Chettiar Vs. Mallappa Reddiar, . The decision in the latter case was that of a Full Bench.

The Calcutta and the Bombay High Courts were of the opinion that it was necessary for the plaintiff to sue in a representative capacity. See Hakim

Lal v. Mooshahar Sahu ILR (1907)Cal. 999. The decisions of this Court and that of the Calcutta High Court arose out of suits which followed

unsuccessful proceedings in execution. The Bombay cases are Burjorji Dorabji Patel v. Dhunbai ILR (1891) Bom. 1 and Ishvar Timappa v. Devar

Venkappa ILR (1902)Bom. 146. These cases did not arise directly out of execution proceedings, but the Court indicated that a suit of the nature

of the present one should be brought in a representative capacity. It seems to me that the amendment of Section 53 of the Transfer of Property Act

by the insertion of the provision that a suit instituted by a creditor shall be instituted on behalf of, or for the benefit of, all the creditors must have

been intended to put an end to this controversy. The words in brackets ""which term includes a decree-holder whether he has or has not applied for

execution of his decree"" which follow the word ""creditor"" in the section, in my opinion, makes this clear. If this is the case the association is clearly

out of Court.

But even if the question had to be decided on the reading of Section 53, without taking into consideration what has gone before, it would still be

difficult to accept the association''s argument. As the suit admittedly is one of the nature contemplated by Section 53 of the Transfer of Property

Act surely the provisions of that section must be applied, especially as there is nothing in the section incompatible with Order 21, Rule 63 of the

Code of Civil Procedure. Section 53 does not take away from the disappointed decree-holder the right to sue. His right to sue is left unaffected.

All the section says is that he must sue on behalf of all the creditors, not for himself alone, and this implies no hardship. If the suit is successful and

the judgment-debtor has not become insolvent, he has still the right to attach the property. If the judgment-debtor has become insolvent, then the

right to attach is gone entirely and the decree holder can only look to the Insolvency Court for payment. The requirement of Section 53 saves the

filing of unnecessary suits and saves the judgment-debtor from being harassed by other creditors. I hold that it was necessary for the association to

sue in a representative capacity and that, not having done so, the suifrnust fail. The same view of the law has been taken by the Calcutta High

Court in Ekkari Ghose v. Sidheswar Ghose (1935) 62 C.L.J. 548 and by the Rangoon High Court in A.K.A.C.T.V. Chettiar v. R.M.A.R.S. Firm

ILR (1934) Rang. 666, Maung Tun Thein v. Maung Sin ILR (1934)Rang. and Asgar Ali v. C.V.R.M. Firm (1935) ILR 14 Rang. 81.

Mr. Bashyam has asked that the association be allowed to amend the plaint and turn the suit into a representative one. In support of this

application Mr. Bashyam has pointed to the fact that before the suit was instituted the association had obtained leave from the Official Receiver

and the leave was conditional on the association depositing in Court to the credit of the insolvent''s estate any amount realised by him as the result

of the suit. Mr. Bashyam has also pointed out that the declaration asked for was a declaration that the disputed transaction was a fraud on the

creditors. If the failure to sue in a representative capacity was the result of oversight, the Court might have been disposed in these circumstances to

allow the amendment, but that is not the case. The appellant in her written statement raised this very question and an issue was framed on it. The

association preferred to contest the validity of the appellant''s averment and succeeded in the argument before the Subordinate Judge. Having gone

to trial on this issue, it is now far too late in the day for the association to ask for leave to amend. It would be opposed to principle and accepted

authority to allow the amendment. The course which the association should have adopted when the question was raised was to apply to the Court

for permission to sue on behalf of all the creditors. This the association did not do and it has only itself to blame for the failure of the suit.

The appeal will be allowed with costs in this Court and below.

Krishnaswami Aiyangar, J.

I agree.