(Pakkiri) Mohideen Tharagan and Another vs Muhammad Mustappah Rowther and Others

Anantakrishna Ayyar, J.—These second appeals preferred by the plaintiffs arise out of two suits instituted by the same plaintiffs against

defendants 1 and 2 who are the same in both the suits, and against defendant 3 who is the purchaser from one or other of the other defendants of

the properties mentioned in the plaint. The prayer in the suits was for a declaration that the plaint properties belong to defendants 1 and 2 and that

the sale deeds executed in favour of defendant 3 are not binding on the creditors of defendants 1 and 2. The purchaser is different in the two suits;

he is defendant 3 in each case. The purchasers will be referred as defendant 3 in the judgment for the sake of convenience. Defendant 3 in O.S.

No. 236 of 1921 purchased from defendants 1, and defendant 3 in O.S. No. 237 of 1921 from defendant 2.

The plaintiffs alleged that they obtained a money decree in O.S. No. 517 of 1916 and attached the plaint properties before judgment in the said

suit; when final orders had to be passed in respect of the said attachment defendants 1 and 2 undertook not to alienate the properties pending

disposal of the suit. After obtaining decree the plaintiffs had the properties sold in execution and themselves purchased the same on 14th June

1918. Defendants 1 and 2 applied to have the sale set aside. That application was dismissed on 5th September 1918. Discovering that there was a

misdescription in relation to one of the properties in the attachment warrant (in as much as survey No. 468-B was by mistake mentioned in the

attachment proceedings, instead of the correct survey No. 568-B which is the chief property included in the sale deeds in favour of defendant 3 in

each of the suits), the defendants with a view to defeat the plaintiff''s claims hit upon the idea of selling the properties (along with some other

comparatively minor items) to defendant 3 in December 1918. The appeal preferred by the defendants was dismissed on 17th March 1919. The

plaintiffs alleged that the sales in favour of defendant 3 in such suit were brought about with the intention of defeating the plaintiffs'' decree debt.

They alleged that the sale deeds were not supported by consideration and were also not real transactions, and that in any event the same

contravened the provisions of Section 53, T.P. Act. The plea of defendant 3 in each of these suits was that the sale in his favour was a bona fide

transaction supported by consideration, that defendant 3 was a bona fide purchaser for value without notice and that the plaintiffs were not entitled

to any relief. Both the lower Courts dismissed the plaintiff''s suits and hence these second appeals have been preferred by the plaintiffs in the two

suits.

The learned advocate for the appellants contended that the lower appellate Court''s findings are unsatisfactory based on a mistake of law and in

any event insufficient to warrant the dismissal of the suits. The lower appellate Court found in para. 15 of its judgment as follows:

The plaintiffs have not discharged the onus of showing that the transfers evidenced by Exs. 1 and 2 were made with intent to defraud or delay the

creditors. That being so the question whether the vendees are transferees in good faith and for valuable consideration requires no proof and no

point can be made therefore of the fact that the vendees let in no evidence whatever on the said question.

In para. 22 the lower appellate Court remarked as follows:

The fact that the assignment of the whole or the bulk of his property by the debtor was made to defeat the claim of a particular creditor is of no

moment if the consideration be adequate. Even if the purchaser had asked the seller why he wanted to sell and the latter had told him that it was to

defeat an execution, that would have been no ground for impeaching a transaction. But the case would be different if the transfer is made in fraud

of the general body of creditors.

In para. 23 the learned Subordinate Judge further observed that:

the evidence of plaintiff 1 led to the only conclusion that the purchase evidenced by the said documents were real and for valuable consideration

but were made to defeat the decree debt of plaintiffs.

It may be mentioned that the defendants filed only their sale deeds Exs. 1 and 2 and let in no evidence oral or documentary. None of the

defendants wont into the box nor anybody connected with the sale deeds. The defendants seemed to have relied upon the abstract theory of the

burden of proof though one would have expected that defendant 3 the purchaser in each of these suits, would have gone into the box and given

evidence about his being a bona fide purchaser for value. It was contended that the lower appellate Court was not right in holding that the sale

made to defeat the decree debt of the plaintiffs"" would still be good. While admitting that a real and a bona fide sale deed executed by the

judgment-debtor for valuable consideration would be valid though the object might be to defeat an expected execution (since the effect of the sale

would be to leave with the judgment-debtor moneys representing the value of the properties sold, which moneys could be utilized for paying, and

would be available to the general creditors of the debtor), it was argued that when the sale is effected not to defeat an expected execution only but

to defeat the decree debt of the plaintiffs,"" that the same would be invalid. It was also argued that there was no evidence that there were other

creditors. The respondents'' learned advocate argued, on the other hand, that a sale to defeat an expected execution is not invalid nor a sale to

defeat an individual creditor. These are only circumstances from which in conjunction with the other evidence in the case the jury or the Court

would have to find whether the object was to defeat or delay creditors. He argued that the findings in this case concluded the appeal against the

plaintiffs-appellants.

There was also discussion before me that though as a matter of fact the Courts find that the plaintiffs did not prove that the property was

attached, yet the decree passed in the suits specifically recited that the properties were attached, and it directed the sale of the attached properties.

It was said that this circumstance had not been noticed by the Courts. Cases reported in Sankarappa v. Kanayya 3 M.H.C.R. 231; Hakim Lal v.

Mooshahur Sahu [1907] 34 Cal. 999; Aftabuddin Chowdhury v. Kumar Mukhapadhyaya [1918] 22 0. W.N. 427; Musahar Sahu v. Hakim Lal

AIR 1915 P.C. 115; Fakira Singh v. Magho Singh [1917] 2 Pat. L.J. 546; Loorthiya Odayar v. Gopalasami Aiyar AIR 1924 Mad. 450; Ishan

Chunder Das v. Bishu Sirdar [1897] 24 Cal. 825 bearing on the application of Section 53. T.P. Act, were cited before me, and extracts from the

judgment of the Full Bench in the Irish case In re, Moroney [1887] 21 Ir. Rule 27 were also read to me.

The onus of proof in a suit u/s 53, to avoid a transfer, is on the plaintiffs who wish to avoid the transfer. If the transfer is for valuable

consideration and is made with the full intention that the title to the property should pass to the transferee, and if no benefit be intended to be

retained to the grantor, then the transfer will be valid as against an attaching creditor even though the object of the transfer might have been to

defeat an impending execution. The general creditors of the transferrer are not defeated in such a case since, instead of the property of the debtor

which has been transferred, there remains the money representing the price paid for the property in the hands of the debtor, and the creditors could

proceed against the same; the debtor might as well have intended to have his property distributed among his creditors instead of allowing it to be

taken in execution by one decree-holder creditor only. In such cases the intention of the debtor to defeat the executing decree-holder creditor''s

expected execution"" does not invalidate the transfer even though the transferee had also knowledge of the same. If the transfer be for cash and be

made to a stranger who had knowledge of the intention of the transferrer to convert the immovable property (which cannot be secreted) into

money (which could easily be secreted) and to defeat the creditors of the transferrer, then the transfer would be invalid. If the transfer be to an

existing creditor to whom the transferrer already owed money, then, oven though the transferee had notice that the effect of the transfer would be

to remove that property, not only from the reach of the executing decree-holder''s expected execution, but also from the reach of other creditors,

the transfer would nevertheless be valid and not open to objection u/s 53, since it is open to every creditor to try his best to realize his debt from

the common debtor; and ordinarily in the race between the creditors he who lags behind could not complain of him who proceeded fast and

succeeded in getting at the property of the debtor. (I am not now considering the effect of the insolvency law in this connexion.) A debtor is entitled

to leave alone one creditor and satisfy the other creditors in cases not falling under Insolvency Acts (provisions relating to fraudulent preference,

&c). If there be only one creditor, then the act of the debtor in transferring all his property to a stranger with a view to secrete the same and defeat

the creditor would be fraudulent and the transfer would be set aside if the transferee had notice of the circumstances and of the debtor''s evil

design.

Thus, in cases where no consideration of the law of bankruptcy come3 in, there is nothing to prevent a debtor paying one creditor in full and

leaving others unpaid, though the result might be that the rest of his assets will be insufficient to provide for the payment of the rest of his debts: see

Musahar Sahu v. Hakim Lal AIR 1915 P.C. 115. But as observed by Sir Francis Maclean and Banerjee, JJ., in Ishan Chunder Das Sarkar v.

Bishu Sirdar [1897] 24 Cal. 825:

Reading this section as a whole, then what it means, so far as it is applicable to a case like the present, is this: that where a transfer of immovable

property is made with intent to defeat or delay any creditor of the transferrer it is voidable at his option.

In this connexion some passages from the judgment of Porter, M.R., in the Irish case In re, Moroney [1887] 21 Ir. R 27 may be quoted:

Next Mr. Carton contended, in reference to the Statute of Charles, that the transaction before us was not intended to defeat creditors in the plural,

but only one creditor; and Wood v. Dixie was relied upon on this point. It is important in this connexion to again consider what are the words of

the Statute of Charles. Its intent is stated in the recital or preamble which I have already read, and which no doubt speaks of creditors. It was

necessary to use the plural and not the singular number. But when we come to the operative part of the section, the words used are not in the plural

only; for we have ""that person or persons, his or their heirs (&c)""; and, therefore, no argument in favour of exempting the case of a single creditor

can be deduced from the language of the Act. It would be the summit of absurdity to suppose that a mischief of this kind was to be struck at if two

or more persons were affected, but that a single creditor was to be without protection. We were also pressed with the other consideration that the

policy of the Act of Charles was quite different from that of the Bankruptcy Act. So it is. I admit that. The early Act only intended to protect the

rights of a special class of creditors, and not all creditors, as the Bankruptcy Act does, If the inference suggested could be drawn from the Act of

Parliament, it is very strange that neither the Judges who decided Twyne''s case, nor Lord Coke, who took as much trouble to report and

comment upon it, ever noticed the point, though the whole discussion there was as to one creditor, there having, in fact, been but a single creditor

in Twyne''s case. The statement of that case sets out: ""C brought an action of debt against Pierce."" There would have been the same answer to that

action as is relied on here if the appellant''s contention before us was right.

No doubt the intention to defraud must be proved; the Court which has to find on facts will have to take into consideration all the

circumstances of the case, the existence of other creditors whom the debtor paid out of the sale proceeds would be conclusive against the

inference of fraud. But when the Court is able to come to the conclusion that it was to defeat a creditor, and not simply to defeat his ""expected

execution,"" then the transfer would be voidable at the instance of the creditor when the transferee was aware of that intention, and when the

intention was not to use the money for payment of other creditors but to help the transferrer to convert immovable property into money and thus to

enable the debtor to secrete the said money. The question will be essentially one of fact, and all that I am anxious to make clear is that it could not

be laid down as a general proposition of law that intention on the part of both the transferrer and the transferee to defeat one creditor of the

transferrer, could under no circumstance enable that creditor to avoid the transfer. The above propositions seem to be deducible from the cases

decided u/s 53, T.P. Act, and from the authorities mentioned already.

In the present case, I think that the relevant questions that arise in these cases have not been properly tried, nor properly considered, by the

Courts. Further, the only evidence is that given by the two plaintiffs in the case. The purchaser in each of these cases, whom I have called

defendant 3, has not gone into the box, nor anybody connected with the sales. The abstract doctrine of burden of proof seems to have been too

much pressed into service by the defendants (purchasers) in these cases. But, as remarked by the Privy Council, it is an error to rely on the

abstract doctrine of burden of proof in all cases: see Murugesam Pillai v. Gnana Sambanda Pandara Sannadhi AIR 1917 P.C. 6 and Rameshwar

Singh v. Bajit Lal Pathak AIR 1929 P.C. 95 (of 40 Mad.) the Privy Council observed as follows:

A practice has grown up in Indian Courts of those in possession of important documents or information, lying by, trusting to the abstract doctrine

of the onus of proof and failing to furnish to the Courts the best materials for its decision.

In the case reported in AIR 1927 230 (Privy Council) , the Privy Council decided that it is the bounden duty of a party, personally knowing

the whole circumstances of the case, to give evidence on his own behalf and to submit to cross-examination. His non-appearance as a witness

would be the strongest possible circumstance going to discredit the truth of his case. They observed at p. 399 as follows:

The true object to be achieved by a Court, of justice can only be furthered with propriety by the (testimony of the party who personally knowing

the whole circumstances of the case can dispel the suspicions attaching to it. The story can then be subjected in all its particulars to cross-

examination.... Their Lord ships cannot doubt that if this part of the case had been treated from the point of view consistent with sound practice, as

just stated, the High Court could never have reached the conclusion come to.

The learned Subordinate Judge admits in para. 19 that ""in the stated circumstances, the said transfers may seem open to suspicion. No

doubt,'''' suspicion, though a ground for scrutiny could not be made the foundation of a decision.."" Muhammad Mehdi Hasan Khan v. Mandir Das

[1912] 34 All. 511. But as observed by the Privy Council in the passage in AIR 1927 230 (Privy Council) , quoted above, the purchasers ought

to have by their personal testimony helped the Court in dispelling the suspicion attaching to the transfers.

No explanation has been given why defendant 3 did not go into the box. The learned advocate only suggested that it was evidently by some

mistake that the same was not done. Again it is not clear whether there were other creditors of defendants 1 and 2 at the time of the sales, though

the lower Court''s judgment makes general reference to creditors,"" and whether there were other properties belonging to defendants 1 and 2, and

if so particulars related to the same could be useful. If the plaintiffs had been the only creditors, then if the present finding of the lower appellate

Court be accepted that the sales were made to defeat the decree debt of the plaintiffs, it is a question for consideration, in the light of the above

remarks, whether the sales could be upheld, if the question had to be decided on the present scanty materials on record. I think that for a

satisfactory disposal of these appeals, it is necessary that the lower appellate Court should be asked to rehear these appeals, after allowing the

parties further opportunity to adduce evidence on the question whether defendants 1 and 2 owned other properties at the time of the sale, and if so

details regarding the same. I think it is also necessary that the mistake committed on the part of defendant in each case in not giving evidence

should be condoned in the circumstances, and the purchasers should be given a fresh opportunity to adduce evidence in the case relating to the

sale deeds, Exs. 1 and 2. As regards one of the sale deeds there is the recital that there were prior debts which were paid from the sale price.

Except the recital, there is no other evidence in the case and it is necessary that the lacune and the defect should be removed. On the whole, I think

it necessary, in the interests of justice, that these second appeals should be allowed, and the appeals remanded to the lower appellate Court for

disposal in accordance with law, and having regard to the observations contained in this judgment.

It is open to the lower appellate Court either to record additional evidence itself, or have the same recorded and certified to it by the first Court

if it should think it necessary to do so. Costs of the second appeals will be provided for in the revised judgment to be passed by the lower

appellate Court. Court-fee on second appeal memoranda will be refunded to the appellants. I am anxious that nothing that I have said above

should be taken as deciding any part of the controversy between the parties on the merits, and it would be open to the lower appellate Court to

deal with the whole controversy between the parties and decide the same In any way it should think fit.