Pothen Ouseph vs Eipe Annamma

Subramania Iyer, J.—The D. H. in O. S. No. 981 of 1108 on the file of the District Munsiff of Kottayam is the Appellant before this Court. The suit was for money based upon a deed of hypothecation. The amount sued for was sought to be realised by sale of the hypothec as also from the other properties of the debtor who was imp leaded in the suit as deft. 1. Subsequent to the deed of hypothecation sued upon, the debtor, deft, 1 executed a document Ex. I called a partition deed in favour of deft. 2 who is his wife as also his son by an earlier wife who is impleaded as deft. 8. All the properties of deft. 1 were transferred to defts 2 & 3 under this document which refers to a list of moveable & of certain debts to be discharged by the donees. Defts. 2 & 3 were impleaded in the suit on the ground that they were interested in the hypothec that was. sought to be sold in the case. That interest obviously arose on accounts of Ex. I. Soon after the suit was filed, the pltf. applied for & obtained an attachment before judgment of four items of immovable property included in Ex. I. The attachment was levied in the year 1108. After notice, the rule was made absolute. In due course, a decree was passed in the case. Nothing was done in respect of this attachment until the year 1122 when deft. 2 came to Court with a petition called a claim under Order 21, Rule 56, Travancore CPC (CPC), objecting to the attachment & claiming title to items 3 & 4 in the schedule to the attachment order as her own, she having obtained title thereto under Ex. I The learned Manaiff found that the petition was not maintainable as a claim because the party objecting to the attachment was deft. 2 in the case & claims under Order 21, Rule 56 can be made only by strangers. The learned Munsiff, however, considered the petition as an objection by a party u/s 40, Travancore CPC , Considering the objection as one u/s 40, the learned Manaiff found that Ex. I which is the basis of the objection was a sham transaction & dismissed the objection. Against the order of the learned Munsiff, a civil miscellaneous appeal was filed in the District Court of Kottayam. That was C. M. A. 63 of 1123 of the Kottayam District Court. The learned Judge in considering that C. M. A. did not agree with the Munsiff that Ex. I was a sham transaction. The learned Judge found, believing the evidence of the witnesses examined in the case, that the properties to whose attachment objection was raised by deft. 2 were in his possession & on the view that the only question for consideration in a claim is one of possession, the learned Judge upheld the objection & allowed the civil miscellaneous appeal. This second appeal is preferred by the pltf. D.H. against the order passed by the learned Dist. J.

The view taken by the learned Munsiff that Ex. I is a sham transaction is erroneous & cannot be upheld, because even according to the pltf. D.H., Ex. I was an effective transaction & it did operate to create some interest in favour of defts. 2 & 3 & it was on that basis that defts. 2 & 3 were imp leaded in the suit as persons hiving some interest in the hypothec which was sought to be sold. The transaction will be a sham only if it is of no effect at all. A transaction which is in fraud of creditors is a real transaction, not a sham transaction The view of the learned Dist. J. that in this case the only question to be considered is one of possession is also erroneous. Unlike the case of a claim by a stranger to the proceedings under Order 21, Rule 56, where the question really is one of possession by the claimant on his own account & not on behalf of the J. D., wherein an original suit will lie by the aggrieved party to establish the right that he claimed, in the case of an objection by a party to the proceedings to the attachment of the properties, that objection is to be regarded as a question arising for consideration u/s 40, CPC (CPC) & in that case not merely the question of possession but the question of title also must be adjudicated & decided & that is why in the case of an objection by a party against the order passed by the first Court there will be an appeal & a second appeal. It is not known how regarded as an order u/s 40, a civil miscellaneous appeal was filed before the District Court. The proper procedure would have been to file an appeal. But that irregularity of procedure is immaterial in the present case as no objection is taken by any party based on that circumstance & no question of jurisdiction arises.

The attachment before judgment was applied for by the party & issued by the Court on the basis that the hypotheca was insufficient to satisfy the pltf.''s claim. The apprehension of the pltf. has proved to be true, because the hypothec was afterwards sold & the proceeds of the sale have been found to be insufficient to satisfy the claim of the D. H. Ex. I under which the debtor, deft, appears to have assigned all his properties in favour of defts. 2 & 3 does not make provision for discharge of the debt due to the D. H. It might have been a secured debt. But there was yet the possibility of the security proving insufficient & need arising for resort to other properties of the debtor. No provision having been made for discharge of the debt due to the D. H. under the deed of hypothecation, the transfer made in favour of defts. 2 & 3 under Ex. I is prima facie in fraud of creditors. It is not disputed that besides the D. H. there were other creditors of deft. 1. It is not also necessary that in order that a transfer may be in fraud of creditors there should be more than one creditor. Even if a transaction is directed to defrauding one creditor alone, it would still be one in fraud of creditors voidable by the creditor sought to be defrauded or delayed.

The learned Counsel for the Respondent argued that if the transaction evidence I by Ex. I is in fraud of creditors, the transaction would only be voidable & not void & that any creditor who seeks to get any relief against the properties comprised in that avoidable transfer must file a separate suit to have the transfer set aside. This contention cannot be accepted. A Full Bench of five Judges of the Madras High Court in Ramaswami Chettiyar v. Mallappa Beddiar 43 Mad. 760 presided over by Wallace C.J., as he then was, decided that to avoid a transfer which is avoidable u/s 53, T. P. Act, it is not necessary that a separate suit should be filed & that it is enough that a creditor or creditors at whose instance the transfer is voidable repudiate the transfer by an unequivocal declaration in the regard. This case was followed by Venkibraramana Rao J. in K.P. Ramaswami Naick Vs. Lakshmana Kudumban and Another, where, as in this case, what the creditor did to repudiated the voidable transfer made by the debtor was to attach the property, the subject matter of the transfer, as still belonging to the J.D. This conduct of the D. H. in attaching property transferred under a transaction voidable u/s 53 was regarded as a sufficient repudiation & unequivocal declaration to repudiate within the meaning of the Full Bench decision in 43 Madras. We are in respectful agreement with the view held in the adobe said Madras cases & we hold that the subject matter of transfer in this case has been available to the D.H. for attachment as property belonging to the J. D., deft. 1 not withstanding the gratuitous transfer under Ex. I in favour of his wife & son. The above considerations lead us to the conclusion that the objection to the attachment raised by deft. 2 ought to be rejected, that the order passed by the learned Dist. J. upholding the objection should be set aside & that passed by the learned Munsiff be restored though not for the reasons relied upon him. The second appeal is, accordingly, allowed with costs throughout.