N.N.L. Ramaswami Chettiar vs Mallappa Reddiar

Spencer, J.—The plaintiff claims the suit properties by virtue of a gift in his favour, dated 19th November 1914. The second defendant is a

creditor of the donor, the first defendant, who obtained a decree and attached the properties in execution. The plaintiff made a claim under Order

XXI, Rule 58, Civil Procedure Code. It was; dismissed and this suit is brought to set aside the summary order and to obtain a declaration that the

property is not liable to be attached.

The trial of the plaintiff''s suit raised the question of law, whether in is open to an attaching decree-holder to plead in defence against the alienee

suit, that the alienation is a fraudulent one intended to defeat or delay the alienor''s creditors. This question was answered in the negative in

Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 , which is a Full Bench decision. We have decided to refer the same question of law once

more to a Full Bench. It need hardly be said that we should not have ventured to take this extreme course if we were not fully convinced that the

law, as laid down by that Full Bench seriously requires reconsideration.

In order to justify this reference it is necessary that I should, as briefly as possible, enumerate the reasons which have impelled us to make it:

There appears to be an increasing sense of hesitation is the minds of both Bench and Bar in regarding Subramania Ayyar v. Muthia Chettiar 43

Ind. Cas. 651 as representing sound law;

Other High Courts have put a different construction on Section 53 of the Transfer of Property Act;

In a case that has since some before the Privy Council a plea of this description was allowed to be raised in defence of the suit;

There are no words in Section 53 which make it imperative that a person defrauded, defeated or delayed should put forward his claim to have

the transfer avoided in a regular suit and not otherwise, and

There are independent reasons for doubting the correctness of the conclusion of the learned Judges who decided Palaniandi Chetti v. Appavu

Chettiar 34. Ind. Cas. 778 upon which the Full Bench case in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 was based.

I will now proceed to amplify the above reasons. On the first point I will merely refer to the opinions expressed by Abdur Rahim, J., in

Cheruthazhath Abdulla Haji v. Cheriyandi Ibrayan Kutti 50 Ind. Cas. 959 ; by Krishnan, J, in Kottarathil Puthiyapurayil Pokker v. Balathil Parkum

Chandrankandi Kunhamad 51 Ind. Cas. 714 and by Sadasiva Aiyar and Napier, JJ., in their reference to the Full Bench on the former occasion at

page 613 Page of 41 M.--[Ed] of Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 . I will only add that I share in the doubts expressed by

the above-named learned Judges.

Next Abdul Kader v. Ali Meah 14 Ind. Cas. 715 is a direct decision to the contrary on the point that a creditor who has obtained a decree and

taken out execution is competent to raise a plea u/s 53 of the Transfer of Property Act that the alienation made by his debtor is voidable and

should be avoided, and the learned Judges quote the English case of Clough v. London and North Western Railway Co. (1872) 7 Ex. 26 . and

two other decisions of the same Court in support of this proposition. The case of Clough v. London and North Western Railway Co. (1872) 7 Ex.

26 . is an authority for allowing a voidable transaction to be avoided on the ground of fraud by any unequivocal act including a statement in a plea

by defendants in an action. This Calcutta case was considered in the Full Bench case in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651

and dissented from without full discussion of the reasons which influenced the learned Judges of the Calcutta High Court in coming to their

conclusion.

In Baroda Prosad Banerji v. Gajendra Nath Banerji Ind. Cas. 289 it was held that when a transaction is voidable it was open to the injured

party to declare his Will to rescind the transaction by way of defence to an action brought to enforce the transaction against him. In Bhikobhai

Mullibhai v. Panachand Odhavji 52 Ind. Cas. 682 the defendant was allowed to set up the defence that a mortgage transaction was intended to

defeat and delay creditors upon a suit brought by the mortgager for a declaration that the defendant was not entitled to attach the properties.

Again, in Ghunsham Das v. Uma Pershad 50 Ind. Cas. 264 , the Privy Council confirmed the decree of the Judicial Commissioner of the

Central Provinces in a suit in which certain creditors who had attached before judgment their debtor''s property raised in defence a plea that the

plaintiff''s mortgage was executed collusively as a device to defeat creditors. If there had been such an easy way of obtaining a reversal of the

Judicial Commissioner''s decision as that of objecting to the plea being raised as a defence to the suit it is likely that that ground would have been

argued before, the Judicial Committee.

In Lakshmi Doss v. Roop Laul 30 M. 169 (F.B.) , a case of a voidable deed the defendant was allowed by a Full Bench of this Court to set up

as defence that the deed was invalid even at a time when a suit to declare its invalidity would have been time-barred. And in Thathu Naik v. Kondu

Reddi 1 Ind. Cas. 221 , two Judges out of three composing the Full Bench held that it was open to the defendants to have a sale set aside by way

of answer to the plaintiff''s claim on the strength of the sale to recover possession of the mortgage property which he had sought in auction in

execution of his mortgage-decree.

As to the two reported cases, about the correctness of which we feel doubt, I may say at once that I do not wish to attempt to challenge the

other principle established by Palaniandi Chetti v. Appavu Chettiar 34. Ind. Cas. 778 , viz., that if a regular suit is brought by a creditor to declare

a conveyance made by his debtor to be invalid, the decree obtained by him would enure for the benefit of all other creditors, and it follows from

this that such suits should ordinarily be brought in a representative character on behalf of all the creditors in order to avoid the same question being

raised again and again by different creditors of the same debtor, although I prefer the opinion of Krishnan, J., in Kottarathil Puthiyapuroyil Pokker

v. Bahthil Parkum Chandrankandi Kunhimal 51 Ind. Cas. 714 , that it should be a matter within the discretion of the Court to direct, at the instance

of the defendant, that a suit by a single creditor should be amended so as to make it a suit on behalf of all creditors, and not that all suits should be

dismissed if not brought is a representative character. It seems to me that, even if this principle of representation be accepted in its fullest

significance, it does not follow as a necessary corollary that a creditor, who is not already bound by a decision of the same question in a prior suit,

should be debarred from setting up the invalidity of the transfer when he is made a defendant in a suit brought by the alienee just because he is a

defendant.

In Palaniandi Chetti v. Appavu Chettiar 34. Ind. Cas. 778 one of the learned Judges, Coutts Trotter, J., did not go beyond what was decided

in Ishvar Timappa Hegda v. Devar Venkappa Shanbog 27 B. 146 , which is an authority for the proposition that if a creditor sues he should do so

in a representative capacity. The other learned Judge, Seshagiri Aiyar, J. reluctantly allowed the validity of the objection that an assignment by a

debtor is good and valid until it is set aside in a proper proceeding. He quoted Vyse v. Brown (1884) 13 Q.B.D. 199 and Glegg v. Bromley

(1912) 3 K.B. 474, as authorities for this, but he did not define a proper proceeding as confined in meaning to a regular suit, nor did he lay down

that the person desiring to avoid the assignment must occupy the rule of plaintiff in such a suit. The above two cases are not, as I understand them,

authorities for such a proposition. He relied, further, on a case decided by the Privy Council in Phul Kumari v. Ghanshyam Misra 35 C : 202 which

decided a sues of Court-fees and incidentally seems to have decided that the effect of the successful suit u/s 283, Civil Procedure Code, (now

Order XXI, Rule 63) to set aside a summary order passed on a claim petition was to place the parties in the same position as they had occupied

before such order was made. The learned Judge did not notice that if the theory advanced in Paliniandi Chetti v. Appavu Chettiar 34. Ind. Cas.

778 was accepted a counter petitioner who succeeded in defeating the claim would be in a worse position than if he failed, because he would have

no right to appeal in the form of a suit under Order XXI, Rule 63, against an order passed in his favour and if the claimant appealed in that form he

should not set up in defence a plea based on Section 53, Transfer of Property Act. In Muthukumara Chetty v. Anthony Udayan 24 Ind Cas. 120

my learned brother pointed out that a party who was entitled to avoid a transaction might do so by other means than by getting a decree of Court

For instance, he might do so by an unequivocal act of repudiating the transaction--See page 877 Page of 38 M.--[Ed.]. The decision of the Full

Bench in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 did not result in any reasons being added to strong then the view taken by the

two learned Judges who decided Palaniandi Chetti v. Appau Chettiar 34. Ind. Cas. 778 , AS this is a point of law which is constantly recurring, I

think it advisable that another Full Bench should finally pronounce on the point whether we should follow the view taken in Palaniandi Chetti v.

Appavu Chettiar and in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 .

Sadasiva Aiyar, J.

I agree with the proposal of my learned brother to refer the question again to a Full Bench. I may be permitted to add a word of explanation.

During the course of the arguments, I expressed rather strongly my reluctance to again refer the question to a Full Bench as I was a party with

Napier, J., to the reference on which Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 was decided and I had, since the date of the full

Bench decision, loyally followed it surrendering as I was bound to do my view on the question. But as my learned brother thought that, even the

English procedure and practice on which the decision in Palaniandi Chetti v. Appavu Chettiar 34. Ind. Cas. 778 was based, seemed not to support

the view taken in that case, (I am myself very diffident to express any opinion on what the practice and procedure of English Courts is or has been

on any matter) and as, in a later Privy Council decision, no objection to the plea of voidability on the ground of fraud raised by the defendants

(creditors) seems to have been taken by the fraudulent alienee based on the ground that the creditors were not legally entitled to put forward such

a plea in defence and could only have the alienation set aside in a suit brought by them as plaintiffs. I got over my reluctance to join in this

reference. According to Kottarathil Puthiyapurayil Pokker v. Balathil Parkum Chandrankondi Kunhamad 51 Ind. Cas. 714 read with Subramania

Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 the decree-holder who was able at once to defeat the claim petition of a fraudulent alienee gets a mere

barren victory which could be at once turned into a defeat if the alienee brings his suit to set aside the order on the claim petition on the ground that

the alienation has not been set aside in a regular suit and so the merits of the alienation should not be gone into, while if the decree-holder was

unsuccessful In the claim proceedings he has the statutory right under Order XXI, Rule 63, (admitted by Sir W.B. Ayling, J., and Krishnan, J, in

his favour in Kottarathil Puthiyapurayil Pokker v. Balathil Parkum Chandrankandi Kunhamid 51 Ind. Cas. 714 to bring his suit against the claim

order and could have the merits of I he fraudulent alienation gone into and decided in that suit. This anomaly is also a ground for re-consideration

of Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 . No doubt, on questions of procedure it is undesirable to unsettle precedents but as no

titles to property are likely to be disturbed and as the result of overruling Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 would only be to

defeat what is almost wholly a technical plea, to simplify procedure, to shorten litigation, and to favour creditors sought to be defrauded (honest

creditors and decree-holders being favourites of the law), I do not think that the objection is a serious one.

This second appeal came on for hearing on the 6th and 7th April 1920, in pursuance of the Order of Reference to a Full Bench upon perusing

the grounds of appeal, the judgments and decrees of the lower Courts and the record in the case and the said Order of Reference. Messrs. K.

Bhashyam Iyengar and V.K. Srinivasa Iyengar, for the Appellant.--The Full Bench decision in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas.

651 needs to be revised. That has been followed in succeeding cases by the Judges with much reluctance and hesitancy, See Cheruthazhath

Abdulla Haji v. Cheriyandi Ibrayan Kutti 50 Ind. Cas. 959 at p 962; Kottarathil Puthiyapurayil Pokker v. Balathil Parkum Chandrankandi

Kunhamad 51 Ind. Cas. 714 . The Calcutta High Court has held the contrary view in Abdul Kader v. Ali Meah 14 Ind. Cas. 715. Where the

creditor has, by an unequivocal act, expressed his intention to avoid, there is no reason why he should be restricted to a suit to do so. A plea to an

action, by the unsuccessful claimant is enough. See also Baroda Prosad Banerji v. Gajendra Nath Banerji Ind. Cas. 289 : and Bhikabhai Muljibhai

v. Panachand Odhavji 52 Ind. Cas. 682 . In Ghunsham Das v. Uma Pershad 50 Ind. Cas. 264 the Privy Council has tacitly approved of the

maintainability of such a plea because they confirmed the lower Court''s decree which was based on such a plea. Under Order XXI, Rule 63 the

scope of the suit is to determine the title of the parties. If the transfer by the judgment-debtor is held to be a fraudulent transaction, the transferee

has no right under his transfer and cannot claim to free the property from the trammels in execution. Then the decision must be in favour of the

creditor what is necessary is only that the creditor should have exercised his option to treat the transfer as void, Section 53, Transfer of Property

Act, does not expressly say that, a suit is his only remedy.

Mr. A. Krishnaswamy Aiyar, (with him Messrs. C.S. Chedambaram Pillai and Marthandam Pillai) for the Respondent--There is no reason to

disturb the considered ruling of the full Bench in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 The non-recognition of a separate suit as

the only remedy of the creditor to avoid a fraudulent transfer will lead to several hardships. In cases where the transfer is valid as to part of the

consideration, the decree in a suit under Order XXI, Rule 63 cannot adequately protest the claimant''s interest, while it recognises the rights of the

creditor. There will be no means of dealing with any equities in favour of the claimant in any decree than might be passed.

The scope of the suit under Rule 63 is not more extended than that the enquiry under Rules 59 and 63. In both alike the question of possessing

will be considered. And in the suit no plea can be allowed as to the binding nature of the transfer to the claimant until the creditor established that it

was not binding on him in a suit of his own.

A suit under Rule 13 is virtually related to the order or the claim petition. In Phul Kumari v. Ghanshyam Misra 35 C : 202 the Privy Council

treat it as a form of appeal related to a prior decree. Therefore, the creditor''s remedy is in an independent suit where all aspects of the question

could be fully considered and determined.

u/s 53 of the Transfer of Property Act the creditor cannot rely on the exercise of his option in defence until he has succeeded in a suit.

As the attachment of immovables is by a prohibitory order issued to the judgment-debtor, there can be no valid attachment of property

fraudulently transferred. Unless the prohibition is directed to the transferee the usual attachment form would be futile.

OPINION

Wallis, C.J.

The decision of the Full Bench in Subramania Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 affirmed the decision in Palaniandi Chetti v. Appavu

Chettiar 34. Ind. Cas. 778 , that a conveyance offending against the provisions of Section 53 of the Transfer of Property Act can only be avoided

in a suit properly instituted for that purpose, and that, consequently, in a suit by on unsuccessful claimant under Order XXI, Rule 64 of the CPC it

is not open to the attaching decree-holder to plead that the transfer by the judgment-debtor to the claimant was fraudulent. This ruling has since

been questioned in two cases in this Court, Cheruthazhath Abdulla Haji v. Cheriyandi Ibrayan Kutti 50 Ind. Cas. 959 , and Kottaratyil

Puthiyapurayil Pokker v. Balathil Parkum Chandrankandi Kunhamad 51 Ind. Cas. 714, as observed in the Referring Order of Spencer, J. where

many of the Indian decisions are sited. The question has, now been very fully argued before a Bench of five Judge?, and after carefully considering

all the arguments addressed to us I have come to the conclusion that the view taken by the two learned Judges of the Calcutta High Court in Abdul

Kader v. Ali Meah 14 Ind. Cas. 715 is right, and that there is nothing to prevent a creditor who has been defrauded, defeated or delayed from

exercising the option given him by Section 53 of the Transfer of Property Act of avoiding the conveyance otherwise than by the institution of a suit

for that purpose. If the framers of the Transfer of Property Act, who were, of course, thoroughly familiar with the English decisions on the subject,

had intended that the creditor should only exercise this option by instituting a suit, I make no doubt that, in a measure which was intended to be

self-contained and to be administered in many places where English decisions are not readily available, they would have said so expressly. As they

have not done so, we are, in my opinion, board to apply the law that voidable transactions may be avoided by any open or unequivocal declaration

of an intention to avoid them as laid down by the House of Lords in Oakes v. Turquand (1867) H.L. 325 , and in numerous other cases.

I prefer to rest my opinion on the language of the section which we have to administer, but at the same time, I do not think that the English

decisions, when properly understood, afford any support to the contrary view. The practice of requiring a creditor suing in Chancery to set aside a

deed of fraudulent transfer to sue on behalf of all the creditors was, in my opinion, only another application of the well-known maxim that he WHO

seeks equity must do equity. As observed by Mr. Kerly in his History of Equity, at page 145, even after the two Statutes of Elizabeth extended the

powers of the Common Law Court to defeat fraudulent conveyances, recourse continued to be had to Chancery to set aside settlements in fraud

of creditors Naylor v. Baldevan 1 Ch. Rep. 69 . This was no doubt; owing to the superior facilities then possessed by the court of Chancery for

eliciting the truth in such cases owing to its power to examine the defendant and to grant discovery, which the Common Law Courts would not do.

It is unnecessary to consider whether the Court of Chancery invariably required a judgment-creditor as a condition of obtaining relief to sue on

behalf of all the creditors. In so far as it did so, it was merely an application of the well known equitable rule which was also applied in the more

recent case of Reese River Silver Mining Co. v. Atwell (1869) 7 Eq. 847 . It was there argued that there was no case in which a creditor had been

allowed to bring such a suit when the debtor was still alive without first obtaining a judgment against him, but this contention was overruled, and a

creditor who had not obtained judgment was allowed to sue, but, at the same time, leave was given to amend the bill (or plaint) by making it on

behalf of all the creditors"" a decision followed by Jenkins, C.J., in a similar case Ishvar Timappa Hegde v. Devar Venkappa Shanbog 27 B. 146 .

That is not the question before us, as the suit with which we are concerned is the statutory suit under order XXI, Rule 63.

This and the other Chancery cases cited in Palaniandi Chetti v. Appavu Chtttiar 34. Ind. Cas. 778, in my opinion, throw no light on the

question whether under the Statutes of Elizabeth it is not open to a creditor to avoid a fraudulent conveyance without suit or action if he can do so

effectively and is prepared to case the risk of having to pay damages should the conveyance ultimately be found not to have been fraudulent. That

he can do so appears from two decisions cited by Sterling, J, in Mouat, In re, Kingston Cotton Mil1 Co. v. Mouat (1899) 1 Ch. 831 where the

creditor''s rights at law and in equity are distinguished. In the very early case of Bethell v. Stanhope Co. (1601) Cro. Eliz. 810 where the testator

shortly before his death had made a fraudulent gift of his goods to his daughter but had remained in possession of them, it was held that they were

assets in the hands of his administrator, and that when the donee afterwards took them it was a trespass against the administrator, and in Shears v.

Rogers (1832) 3 B. & Ad. 362 Littledale, J., observed ""creditors Had a right to the property which the deed purported to convey, and might

enforce that right at law. The assignment was void as soon as the creditors claimed to treat it as such, though not until then.

The judgment-creditor''s right to take in execution goods which have been made the subject of a conveyance offending against the Statute of

Elizabeth without bringing a suit to set aside the conveyance has also been recognised in a number of cases beginning with the early case of Turril v.

Tiprer 2 Roll Rep. 493 where it was held that an alienee from the judgment-debtor under a fraudulent conveyance could not maintain an action of

trespass against the Bailiff of a Manor Court for seizing the goods, which were the subject of the conveyance, in execution against the judgment-

debtor. Later cases, went further, and held that the Sheriff or Bailiff was not only entitled to seize in execution goods which had been fraudulently

transferred by the judgment debtor but was bound to do so. In Lovick v. Crowder (1828) 8 B & C.132 Lord Tenderdon said: ""Now, if a party

be in possession of the goods apparently the property of the debtor, the Sheriff, who has a fasri facias to execute, is bound to inquire whether the

party who is in possession is so bona fide; and if he find the possession is held under a fraudulent bill of sale, he is bound to treat it as null and void,

and levy under the writ."" The same rule was laid down by Baron Parke in Imray v. Magnay (1843) 11 M. & W 267 in which a fraudulent

judgment had been suffered by the debtor: The judgment is by the Statute (13 Eliz.) made void against creditors, but by implication it is void

against a Sheriff, who acts in right of a creditor; as a deed is, which is fraudulent, against creditors: Tarvil v. Tipper (1627) at. 222 . And it is now

of frequent occurrence, that the Sheriff is bound to take goods which have been fraudulently conveyed or assigned to defeat creditors and is

responsible in an action for a false return at the suit of the creditor; and the Statute seems to us to put both (the judgment and the conveyance) on

the same footing,"" In Remmett v. Lawrence (1850) 15 Q.B. 1004 doubts were expressed as to how far the Sheriff was bound to take notice that

a judgment or conveyance was fraudulent but Imray v. Magnay (1843) 11 M. & W 267 was subsequently affirmed in Christopherson v. Burton

(1848) 3 Ex. 160. It is unnecessary to pursue the question of the Sheriffs liability. What is material is that the decisions of these eminent Judges

proceeded on the view that the Sheriff in execution may do what the creditor could do himself, viz., avoid the fraudulent conveyance without a suit.

As regards Vyse v. Brown (1884) 13 Q.B.D. 199 all that was decided was that the defendant, who was the executor under a Will by which the

judgment-debtor became entitled to a legacy which he was said to have fraudulently alienated, could not be said to be a debtor to the judgment-

debtor in the amount of the legacy so as to entitle a creditor of the judgment-debtor to take garnishee proceedings. In Glegg v. Bromley (1912) 3

K.B. 474 it was held that the assignment there in question, was not in contravention of the Statute of Elizabeth, and no question as to how such

settlements could be avoided appears to have arisen. These decisions appear to have no bearing on the present question.

It is the less necessary to import restrictions into Section 53 of the Transfer of Property Act because the Legislature in India has made what it

considers sufficient provision for the rights of the other creditors in the provisions of the Code relating to the rerealization and distribution of assets

in execution by allowing judgment creditors who come in before the realization of the assets to share in them.

The actual question referred to us is, whether it is open to an attaching decree-holder to plead in defence to a suit by the alienee whose claim

has been rejected that the transfer to him was fraudulent u/s 53. For the reasons already giver, I am of opinion that it is open to the judgment-

creditor by virtue of Section 53 of the Transfer of Property Act to attach as the properly of the judgment-debtor property which has been

fraudulently transferred to the claimant with intent to defeat or delay creditors. If he knows of the transfer when he applies for attachment, the

application is sufficient evidence of his intention to avoid it; if he only hears of the transfer when a claim petition is preferred under Order XXI, Rule

58, and still maintains his right to attach, that again is a sufficient exercise of his option to avoid and entitles him to succeed in the subsequent suit

under Rule 63 which has next to be considered.

When the claim is preferred, it becomes the duty of the executing Court to investigate it unless of opinion that it was designedly or

unnecessarily delayed. What is to be investigated at this stage is provided by Rules 60 and 61 and is not the creditor''s right to attach, but the

question whether the judgment-debtor was in possession (as defined in the rule) of the attached property at the date of the attachment. If he was,

the attachment is to continue and execution to proceed, subject to the result of the suit which the claimant may institute within one year to establish

his right; and according to the decision of the Full Bench in Machi Raju Venkataratnam v. Vadrevu Banganayakamma 48 Ind. Cas. 27O the result

is the same under the present Code when the claim 13 rejected on the ground that it was designedly or unnecessarily delayed. On the other hand, if

the judgment-debtor is found not to have been in possession as defined in the rule, the attachment is to be raised and executor against the attached

property suspended until the judgment-creditor has established his right to attach in a suit under Rule 63 If the provisions of Rules 60 and 61 be

pursued, the question whether the claim should be allowed or disallowed in the first instance will depend on whether the judgment-debtor or the

transferee was in possession as defined in Rule 60 at the date of the attachment. I am not satisfied that it was intended to lay down a different rule

in Ramu Aiyar v. Palaniappa Chetty 8 Ind. Cas. 117 , but if it was I am unable, with great respect, to follow that decision.

The resulting suit under Rule 63 is by the unsuccessful party to the claim petition ""to establish the right which he claims to the property in

dispute."" Whether this suit be instituted by the attaching decree-holder or by the transferee claimant, it must equally be decided in favour of the

former, if the transfer is shown to have been fraudulent because, in consequence of the fraudulent character of the transfer and its avoidance by the

judgment creditor, the result is that the transferee has not the right which he claims to hold the property free from attachment in execution by the

judgment-creditor. This view is entirely in accordance with the policy of these provisions of the Code, as explained by the Privy Council in

Sardhari Lal v. Ambika Pershad 15 C. 521, which is to secure the speedy settlement of questions of title raised at execution sales. We have,

however, been referred to the later decision of the Privy Council in Phul Kumari v. Ghanshyam Misra 7 C.L.J. 36 . All that was decided in that

case was that a suit by the unsuccessful party to establish his right u/s 283, now Order XXI, Rule 63, of the CPC was, ""a suit to alter or set aside

the summary decision or order of any of the Civil Courts not established by Letters Patent or of any Revenue Court"" within the meaning of Article

17 at Schedule II of the Court Fees Act. Their Lordships proceeded on the ground that a suit u/s 283, Rule 63, was not only the appropriate but

the only means of setting aside the order passed on the claim petition and held that this was sufficient to bring the suit with in the terms of the

Article. They, no doubt, referred in one place to the suit u/s 283 to establish the right of the unsuccessful party to the claim petition as an ""action of

appeal"" and to the plaint in such a suit as ""a plaint for review of a summary decision,"" but this language must be read with reference to the question

before them. The effect of the judgment in a suit u/s 283, now Rule 63, as stated by the Privy Council in Sardhari Lal v. Ambika Pershad 15 C.

521 and as appears from the provisions of the Code which I have examined, is to settle, as between the attaching decree-holder and the claimant

the question of title arising in execution, with the result that the order on the claim petition (which in the judgment of Phul Kumari v. Ghanshyam

Misra 7 C.L.J. 36 is referred to as a decree) is either set aside or confirmed. All that their Lordships decided in the later case was that this latter

result was enough to bring the suit with in the operation of Article 17 of Schedule II of the Court Fees Act.

On the whole, I have come to the conclusion that, on the language of Section 53 of the Transfer of Property Act, the question referred to us

must be answered in the affirmative, and I am confirmed in this view by the conclusion to which I have come that the law is the same in England

with regard to transfers offending against the Statute of Elizabeth.

Oldfield, J.

The cases we have to consider are those in which the claimant, having failed to obtain an order under Order XXI, Rule 60, Civil Procedure

code, brings the suit authorised by Rule 63 ""to establish the right which be claims to the property in dispute."" We are asked to decide whether the

attaching creditor, defendant in such a suit, can plead that the transfer on which the claimant relies offends against Section 53, Transfer of Property

Act, or whether he must reserve that plea for separate proceedings to be instituted by him for its avoidance.

Of the arguments, by which the latter alternative is supported, that based on the alleged difficulty of combining in the decree in a suit under Rule

63 a recognition of the creditor''s right with the protection, to which the claimant''s interest is entitled, can be dealt with shortly. For, firstly such a

decree will not declare generally that the transfer is void, but only, what Section 53 permits, that it is not binding as between the creditor and the

claimant; and, next, there will be nothing to prevent recognition of such right as the -latter may establish by showing that, as regards a portion of the

consideration, the transfer to him was valid. The Court can meet either contingency as it would in a salt by the creditor, the one by a direction

regarding the disposal of the balance of the sale proceeds after the creditor''s decree has been discharged, and the other by allowing him to

proceed against the property only after he has paid any amount to which the claimant is legitimately entitled. I turn to the two more substantial

contentions relied on, that the scope of the suit under Rule 63'' being no greater than that of the investigation under Rules 59 and 60, only the

possession which would be decisive in the latter, can be considered in the former and that no plea regarding the character of the claimant''s transfer

as binding on the creditor can be considered, until or unless the latter has negatived that character by obtaining a decree.

The first of these contentions is involved in some confusion, because it is no doubt true that Subordinate Courts in fact are not dealing with

claims only with reference to possession and are erroneously considering the character of the title on which the claimant relies; and they are

supported in doing so by the head-note to Ramu Aiyar v. Palaniappa Chetty 8 Ind. Cas. 117 . If that were really the result of that decision, I

should with, all deference, doubt its correctness. But, in fact, it decided only that the rejection of a claim by an order, which was based on a finding

as to possession and which was not attacked within a year by a suit, was final as against the claimant''s right, even as based on his title; and if there

are some observations in the judgment arising from the reference in that order to title as well as and in connection with possession, it does not

follow from them that the learned Judges meant more than that the adjudication as to the latter became final by implication also as to the former.

More certainly would have been inconsistent with the marked distinction between the references to possession in rules, 59, 60 and 61 in

connection with the preliminary order under the two last mentioned, and the reference in Rule 63 to the establishment in the subsequent suit of the

right claimed by the plaintiff. But as the investigation is restricted to the question of possession, that distinction is sufficient to negative the

applicability of a similar restriction to the last stage of the proceedings; nor can any support for such application be found, as Mr. Krishnasami

Ayyar contends, in the reference by the Judicial Committee in Phul Kumari v. Ghanshyam Misra 7 C.L.J. 36 to the suit under Rule 63 (or the

provision previously corresponding therewith) as simply ''a form of appeal related to a prior decree,"" which constituted the cause of action. For

their Lordships were not dealing in that case with any question of the substantive rights of the parties or the contentions open to either of them but

only with a question of Court fees in connection with which the character of the relief asked for by the plaintiff would be decisive.

This failing, there remains the more substantial contention that the defendant creditor cannot rely on any exercise of his option u/s 53, Transfer

of Property Act, in defence or unless he has brought and succeeded in a suit. On this point, I respectfully accept the statement of the English law in

the judgment just delivered and turn to the Indian authorities. There is no doubt that generally, the exercise of the option to avoid a contract can be

pleaded by the person entitled to exercise it in defence as, for instance, in cases under Sections 19 and 20, Indian Contract, Act Vide Orr v.

Sundra Pandia 17 M. 255 ; Lakshmi Doss v. Roop Laul 30 M. 169 (F.B.) ; Raja Rajeswara Dorai v. Arunachellam Chettiar 19 Ind. Cas. 596

and Rangnath Sakharam v. Govind Narasiva 28 B , and it has not been shown to be material that the person concerned u/s 53, Transfer of

Properly Act, is not the executant of the contract, or that his plea involves his right to avoid it, not absolutely, bat only as between him and the

party to it, who has claimed. There is therefore, nothing contrary to principle in the authorities relied on by Spencer, J., in the order of reference;

and Rajani Kumar Dass v. Gaur Kishore Shaha 35 C. 1051 may also be mentioned in connection with another argument already referred to as an

instance of a case in which partial effect was allowed to the plaintiff''s transfer. Most of these decisions were no doubt given, not in connection with

the claim procedure, but in ordinary suits brought on a transfer without a previous order rejecting a claim by the plaintiff. But that cannot affect their

weight in the present discussion in view of the very comprehensive scope of the special remedy allowed is Rule 63 and the description of its

purpose by the Judicial Committee in Sardhari Lal v. Ambika Pershad 15 C. 521 as the speedy settlement of questions of title arising at execution

sales. It is, as these decisions show, essential only that the attaching creditor, pleading Section 53, Transfer of Property Act, in defense, shall have

exercised his option in some unequivocal way; and that he will have done, if not in all oases by his attachment, at least when he afterwards opposes

the transferee''s claim with full knowledge of it in the proceedings under Rule 59. In these circumstances, I agree with the answer proposed by the

learned Chief Justice.

Sadasiva Aiyar, J.

Whenever English decisions are quoted before us, I, no doubt, receive much instruction and guidance when the decisions deal with questions

of general jurisprudence, with the common law rights of the Crown and the subjects, and with the application of universal maxims of justice, equity

and good conscience to a given state of facts. But when such English decisions are quoted as deal mainly with forms of action, with the practice as

to the impleading of particular parties in particular actions, with procedure in execution with the distinctions between actions at common law and at

equity, I have always felt myself going beyond my depths, even when acute and able lawyers like Mr. A. Krishnasawmi Aiyar handle such case

with confidence, and I am free to confess that I am often inclined to exhibit signs of impatience when I so feel myself unable to appreciate the

relevancy of arguments based on such cases.

In the present case, I am glad that I need feel no anxiety that my imperfect knowledge of English procedure and precedents might have led me

into serious error, as my Lard the thief Justice has fully dealt with the English decisions quoted before us and has shown that they lend little or no

support to the respondent''s contention.

On the question of the interpretation to be placed on the language of the provision is contained in Order XXI, Rules 58, 59, 60 and 63, the

matter has been dealt with fully by Krishnan, J., in Kottarathil Puthiyapurayil v. Balathil Parkum Chandrankandi Kurtharnad 51 Ind. Cas. 714 by

Spencer, J., in his referring order and by my Lord in the judgment now pronounced by him; and I have nothing to add except to say that, with the

greatest respect, I dissent from the observations found in Ramu Aiyar v. Palaniappa Chetty 8 Ind. Cas. 117 as regards the scope of order XXI,

Rules 59 and 60. That when inspiring in summary proceedings held is accordance with certain statutory provisions intended for speedy disposal of

(what I may call) ""emergent"" disputes, the Court may be prohibited from going into complicated questions of title or investigating complicated

questions like fraud, trust and so on, while giving the party defeated in the summary inquiry the right to have the whole matter and all the questions

which are in dispute fully investigated in an ordinary regular suit, ft not at all a Strange or uncommon provision of the Statute law. (See Section 9 of

the Specific Relief Act, the possession chapter of the Criminal Procedure Code, and the analogous provisions in the Succession Certificate Act,

the Estates Land Act, etc.)

I am, therefore, clear that the Court is bound to order the release of an attached property if it finds possession in the claimant on his own

account, even if there is title and disposing power remaining in the judgment-debtor, Such a release is, however, not an adjudication that the

decree-holder had not got the right u/s 60, Civil Procedure Code, to attach or that he could not successfully nullify the release orders in a suit

brought under Order XXI, Rule 63. u/s 63, of the Civil Procedure Code, the property liable to attachment need not be is the possession of the

judgment debtor, because all saleable property, moveable or immovable, belonging to the judgment debtor or over which or the profits of which he

has a disposing power which he may exercise for his own benefit, whether the same be held is the name of the judgment-debtor or by any other

person in trust for him or is his behalf, can be attached. Order XXI, Rules 59 and 60, however, seem to make it clear that oven if a trespasser is in

actual possession of such property (the evidence to prove and the character of such actual possession varying, of course, with the nature of the

property attached), the Court is bound to release the property to the extent of such possession subject to the right to attach being established in a

suit under Order XXI, Rule 63. In such a suit, the plaintiff decree holder, might, of course, prove that the claimant was really not in possession

notwithstanding that the Court which inquired into the claim petition held the contrary (and, therefore, the summary order releasing the attachment

was wrong) but he can also prove that the judgment-debtor, notwithstanding the trespass by the claimant, had not lost his rights and that the

property could therefore, be attached u/s 60.

Mr. Krishnasawami Aiyar, as I understood him, did not dispute the proposition that a third person against whom a transaction is voidable can

avoid it by an unequivocal declaration, or by unequivocal conduct disclosing that he knew of the transaction and bad treated it as avoided by him

see Bijoy Gopal Mukerji v. Krishna Mahishi Debi 34 C. 329 (P.C.) . If, when a person is bound to avoid it by bringing a suit in a Court to set it

(transaction) aside (owing to a statutory law expressly or impliedly prescribing such a course as the only means at avoiding it or by his having been

himself a party to the transaction sought to be avoided), and he does not do so within the time allowed by law for such a suit, he could after the

expiry of such a period, plead the voidability by way of defence, is a moot question on which I prefer to reserve my opinion, notwithstanding the

decision in Lakshmi Doss v. Roop Laul 30 M. 169 (F.B.) . But no such question arises in this case.

A rather far-fetched argument was based on the decision of the Privy Council in Phul Kumari v. Ghanshyam Misra 7 C.L.J. 36 that, for

purposes of the Court-fees, a suit under Order XXI, Rule 63, should be held to be a suit to set aside the order on the claim petition, as it is of the

nature of an appeal in the form of a suit. That argument has been adequately deals with (if I may be respectfully permitted to do so) by my Lord

and I need say no more on that point.

Two other arguments which Mr. Krishnasami Iyer put forward with his usual resourcefulness might be shortly noticed. On the language of

Order XXI, Rule 54, which says that the attachment of immovables in execution should be made by an order prohibiting the judgment-debtor from

transferring or charging the property in any way, etc, he argued that the Legislature impliedly intended that no valid attachment could be made of

property which had been fraudulently (but not nominally) transferred as the prohibition by the attachment order addressed to the judgment-debtor

alone who had no power to make a further transfer would be futile in such a state of facts and the form of the order prescribed for such a case

would have been a prohibition to the fraudulent transferee from making any farther transfer by himself. This ingenious argument is based on the

assumption that the Legislature, whilst enacting a general provision as to the form in which an order of attachment should be issued for the purpose

of securing due publicity, intended that the general form should take into account and contain appropriate words to cover all possible contingencies

and all possible complications of facts which may arise, such as the case of the creditor being entitled to avoid the transfer (by the judgment-

debtor) to a fraudulent transferee u/s 53 of the Transfer of Property Act and the consequent result that, so far as the creditor''s remedies are

concerned against the transferred property, the transfer is void though the judgment-debtor would himself be unable to transfer it again whether an

attachment order is or is not issued prohibiting him from doing so.

A general and single form of order for proclamation to the public was provided which would be applicable to the facts of most cases and the

Legislature enacted that when an order is passed in such a form it shall constitute a valid attachment of the property in execution in all cases and

under all circumstances after the order is proclaimed in the prescribed manner.

The other argument was that the CPC contained no special provisions which would place a fraudulent transferee (whose transfer was avoided

by a decree-holder acting u/s 53 of the Transfer of Property Act) in the position of the judgments debtor himself, go that notices of attachment,

notices for settlement of sale proclamations, etc., may be issued to the fraudulent transferee instead of to the judgment debtor, or in addition to the

judgment-debtor, and so that the balance of sale proceeds remain after the sale of the attached property might he paid to the fraudulent transferee

instead of to the judgment-debtor and so that he might get the benefit of Sections 310 and 310A of the CPC as to setting aside sales by payment

within 30 days and so on. There is also no provision made for the fraudulent transferee when another decree-holder applies for rateable

distribution u/s 73 to intervene and prove to the Court that that particular creditor was estopped by his conduct from treating the transfer as

voidable by him also and as entitling him to rateable distribution. I am wholly unable to appreciate the argument that the failure of the Legislature to

carefully look after the interests of the fraudulent transferee is a reason for holding that the decree-holder sought to be defrauded by him cannot

avoid fraudulent transfer except by a suit in which he is the plaintiff or cannot bring a suit except in a representative capacity, or except in such a

manner as to enable the Court to convert it into a creditor''s administration suit, or cannot set up in defence to a suit by a fraudulent transferee that

the decree-holder had avoided the fraudulent transfer by an unequivocal act or declaration; though the plain words of the Statute law and the

principle of general jurisprudence give him such rights. I must admit that I was not at all moved by the tale of the alleged hardships and

inconveniences (which would result according to Mr. Krishnaswamy Aiyar) to the fraudulent transferee by the absence of such express provision in

the Civil Procedure Code. On the other hand, my sympathies are with the honest creditors and decree-holders who are the favourites of the law.

It must be admitted that it was unquestionably assumed in this High Court and in all the Mofusil Courts before the decision in Palaniandi Chetti

v. Appavu Chettiar 34. Ind. Cas. 778 (as pointed out in that decision itself) that the decree holder, when be is the defendant in a suit brought under

Order XXI, Rule 63 could in defence plead that he had avoided the fraudulent transfer either u/s 53 of the Transfer of the Property Act or under

general principles of jurisprudence embodied in the Statute of Elizabeth and that hence plaintiff''s suit should be dismissed, Much inconvenience and

hardship would result to the decree-holder if the law allowed a fraudulent transferee plaintiff to successfully raise a purely technical demurrer to

such a plea of the decree-holder defendant.

The cases in which the judgment-debtor''s transferee who failed in his claim petition and came in as the plaintiff in a suit under Order XXI, Rule

63, may be classified as follows:

(a) Where the transferee is a mere nominal transferee:

(b) Where he is a fraudulent transferee in possession:

(c) Where he is a fraudulent transferee not in possession.

A creditor decree-holder who is in most cases a stranger cannot reasonably be expected to know of his own knowledge whether a transfer by

his judgment-debtor is only fraudulent or is wholly nominal or partly nominal and partly fraudulent and whether the transferee is in possession, and,

if in possession, whether be is so for himself or for the judgment debtor. He would, therefore, usually both in the claim petition and in the suit which

afterwards arises out of the order against the claimant be obliged to raise and he justified in raising alternatively all the pleas open to him, and the

Court which decided the claim against the claimant might, in its conclusion on each of the three points, be either right or wrong. In the suit also, the

Court of first instance may decide in favour of the plaintiff transferee or against him and may decide these three points rightly or wrongly (the right

decision being, of course, assumed to be that he was merely a fraudulent transferee and not a more nominal transferee) and there might be appeals

and second appeals before the questions are finally decided rightly. That the decree-holder who bona fide pleads that the transfer is a nominal one

in the alternative and who cannot be sure whether and when the defeated claimant would bring his suit and whether there would be appeals and

second appeals if the transferee fails in the first stages of the suit, that he should finally, after a great delay, be obliged to set aside the transfer by

obtaining a formal decree of Court in a suit of his own before he could proceed with his execution by attachment and sale of the fraudulently

conveyed- property would, in my opinion, be a much more serious hardship on the decree holder for no fault of his than the minor hardships and

inconveniences to the fraudulent transferee mentioned by the respondent''s learned Vakil. As shown in one of the later decisions, he would be in a

much worse position for his success in the summary claim proceedings than if be had lost in those proceedings.

Finally, I agree both with the answer proposed by my Lord to the question referred to the full Bench, and with the propositions of law laid

down in support of that answer in his judgment.

Spencer, J.

As the judgments of my Lord and of the two other learned Judges which have just been delivered are in favour of the view that I took in my

Order of Reference. I have nothing to add beyond expressing my concurrence with them.

Sishagiri Aiyar. J.

Ever since the decision in Palaniandi Chetti v. Appavu Chettiar 34. Ind. Cas. 778 was pronounced, there has been a growing feeling in the

profession that it should be re-considered. Almost every one of my learned colleagues felt great disinclination to accept it as good law. It certainly

has upset the practice which has hitherto obtained in such matter. I myself said in the decision that my conclusion was reluctantly come to. In the

last paragraph of that judgment, Preferred to the judgment of the Judicial Committee in Phul Kumari v. Ghanshyam Misra 7 C.L.J. 36, as

compelling me to take the view I did. In these circumstances, I am not unwilling to re-consider my decision.

I still hold that the judgment of the Judicial Committee, if it is regarded as a considered pronouncement, fully justifies my view. Their Lordships

say distinctly that a wrong idea about the nature of the suit under Order XXI, Rule 63, is prevalent and that that idea is responsible for the view

taken regarding the amount of Court-fee in such suit. They then point out what, in their view, is the true scope of suits of this description. The

majority of the Full Bench have come to the conclusion that this decision should be confined to matters relating to Court-fees and should not be

farther extended. I have felt doubts whether it is permissible for us to read a judgment of the Judicial Committee in the way suggested. But there

have been precedents in this Court, wherein the dicta of the Judicial Committee have been restricted to the real matter in controversy in litigation.

There is also the classic pronouncement of Lord Halsbury that a judgment of the highest Tribunal is only authority for the point actually decided and

that the decision should not be divorced from the facts on which it was based. For all these reasons, I do not feel it necessary to adhere to the view

which I took in Palaniandi Chetti v. Appavu Chettiar 34. Ind. Cas. 778 . Upon one matter I feel little doubt after hearing the full argument

addressed to us now, and that is that the scope of Order XXI, Rules 58 to 63, should be restricted to an enquiry into the question of possession

and should not be relied on for investigating titles to property. I feel considerable doubt, however, upon the interpretation to be placed on the

language of Rule 63. Even supposing that we do not accept the letter of the ruling of the Judicial Committee in Phul Kumari v. Ghanshyam Misra 7

C.L.J. 36 , it seems to me that a suit instituted by a party against whom an adverse order has been passed in a claim proceeding should be

confined to litigating the title as between himself and the successful claimant. I am not, as at present advised, prepared to hold that the limitation

placed upon the summary enquiry should be wholly ignored in dealing with the suit following the enquiry. The view that the result of the summary

enquiry only furnishes an opportunity for ventilating every possible right in respect of the claims of parties to the enquiry seems to go further than is

warranted by the language of the rules.

Even taking this view, the question will remains whether the language of Section 53 of the Transfer of Property Act should be read as

contemplating suits by the person who alleges that the alienation is in fraud of his rights.

Mr. Krishnasami Ayyar did not dispute the proposition that a party who is entitled to come to Court as a plaintiff to impeach a voidable

transaction is ordinarily entitled to put it forward as a defence when he is attacked. The observations in Oakes v. Turquand (1867) H.L. 325 that

an open and unequivocal declaration of intention to avoid will have as, good an effect as an attacks by way of suit is as applicable to India as to

England. In that view, is there any reason for construing the words chat every transfer of Immovable property * * * * * is voidable at the option of

any person so defrauded, defeated or delayed as compelling the (defrauded to institute a suit? I see no sufficient reason for insisting on this view.

As I said before, the only real difficulty is in interpreting the decision of the Judicial Committee in Phul Kumari v. Ghanshyam Misra 7 C.L.J. 36 . If

the result of the suit under Order XXI, Rule 63, is to place the parties in status quo ante by removing the fetters placed on execution during the

claim proceedings, then it stands to reason to hold that as on the date of the removal of the impediment, the transaction between the vendor and

the vendee was valid inter se; there was no interest of the judgment-debtor available for attachment on that date and none came into existence by

virtue of the decision in the suit, but if the other view that the suit, under Rule 63, although based upon the result of the claim proceedings, is an

independent action which is not restricted in any way by the previous enquiry is to prevail, the decisions in Palaniandi Chetti v. Appavu Chettiar 34.

Ind. Cas. 778 and Subramania. Ayyar v. Muthia Chettiar 43 Ind. Cas. 651 cannot be supported.

This if my answer to the reference.