Ramanatha Sastrigal vs Alagappa Chettiar and Others

Krishnaswami Nayudu, J.—The plaintiff appellant instituted the suit out of which this appeal arises as assignee of a simple mortgage dated

12th February, 1937, evidenced by Exhibit A-1 executed by the 1st defendant''s deceased father in favour of the plaintiff''s aunt for Rs. 300 with

interest at 6 per cent, per annum and assigned over to the plaintiff by his aunt under a deed of assignment dated 19th April, 1942, Exhibit A-2. The

contesting defendant is the 2nd defendant, who is a purchaser of the suit property in execution of a simple money decree obtained by his father

against the 1st defendant''s father in O.S. No. 496 of 1933 on the file of the Chief Court, Puddukottai. He attacked the truth and validity of the suit

mortgage and denied it was supported by consideration or that it was duly attested according to law or otherwise binding upon him and pointed

out that the same was brought about in the following circumstances. In execution of the money decree obtained by his father in O.S. No. 496 of

1933, on 30th October, 1933 and 20th November, 1933, his father applied for attachment of the suit hypotheca and also applied to the

Registrar''s office for encumbrance certificate, obtained it arid brought the suit properties to sale and purchased them himself. After his father''s

death the 2nd defendant obtained delivery of possession through Court on 25th October, 1938. In the encumbrance certificate obtained by his

father the existence of the mortgage was not disclosed, though he claimed to have made a search up to 13th February, 1937 or 14th February,

1937. The 2nd defendant alleged that knowing that his father applied for encumbrance certificate, the 1st defendant''s father, the judgment-debtor,

and the plaintiff in collusion brought about the suit mortgage fraudulently, nominally and speculatively in favour of the plaintiff''s aunt with a view to

defraud. The trial Court found against the 2nd defendant''s contention and granted a decree. In appeal, the learned Subordinate Judge of

Pudukottai found that there was no proof of the proper execution and attestation of the suit mortgage deed and that therefore it could not be used

in evidence and also found that the suit mortgage was a sham and fraudulent document brought into existence to defraud the 2nd defendant''s

father''s decree debt.

As regards the due execution and attestation of the mortgage deed, the lower appellate Court observed that since the attestation has been

specifically denied by the 2nd defendant, it was incumbent upon the plaintiff to prove execution by calling at least one attesting witness, if such a

witness be alive and subject to the process of the Court and capable of giving evidence, u/s 68 of the Indian Evidence Act. The plaintiff who was

examined as P.W. 2 stated that he had no knowledge of the mortgage document before its assignment under Exhibit A-2. The executant of the

mortgage deed who is also the writer of the document is dead. None of the two attestors were called to prove execution of the document and they

were not shown to be not alive. The Sub-Registrar who registered the document was examined as P.W. 1 who stated that he registered the suit

hypothecation bond and had known Gopala Ayyar, the executant, personally.

Reliance was placed on the Full Bench decision in Veerappa Chettiar Vs. Subrahmania Aiyar and Others, , where the mortgage bond was

attested by only one witness, but, on the findings, that the Sub-Registrar who registered the document made his signature in the registration

endorsement referring to the admission of execution by the executants of the document in the presence of the executants, that the identifying

witnesses before the Sub-Registrar were present when such admission of execution was made by the executants and that the identifying witnesses

made their signature in the presence of the executants, it was held that the signatures of the Registering Officer and the identifying witnesses affixed

to the registration endorsement are a sufficient attestation within the meaning of action 59 of the Transfer of Property Act. In Surendra Bahadur v.

Behari Singh (1939) 2 M.L.J. 762 , a Full Bench of the Allahabad High Court The Full Bench decision is reported in Lachman Singh v. Surendra

Bahadur singh I.L.R.(1932) All. 1051 declined to accept the correctness of the Full Bench decision in Veerappa Chettiar Vs. Subrahmania Aiyar

and Others, .

The identical question came up for consideration in S.A. No. 1548 of 1950 and in my judgment in that appeal I referred to the conflict of

opinion between the Madras and Allahabad High Courts. It is not, however, necessary to examine the question further, as in this case there were

no identifying witnesses before the Sub-Registrar at the time of the registration, the document having been registered by the Sub-Registrar, whose

endorsement is that the executant Gopala Ayyar was known to him and that therefore he dispensed with the attestation of identifying witnesses.

The execution of the document not having been proved and as the execution has been denied, the view taken by the lower appellate Court that it

cannot be admitted in evidence is correct.

On the facts, the learned Subordinate Judge examined the circumstances under which the suit document was executed and found that it was not

really supported by consideration and that the object with which the mortgage was brought into existence in favour of the plaintiff''s aunt was to

defraud the 2nd defendant''s father from realising the fruits of his decree. It may be mentioned that the plaintiff also was a creditor of the 1st

defendant''s father and he had obtained a decree in O.S. No. 338 of 1935 on the file of the Chief Court of Pudukottai and for payment of Rs. 250,

which was said to be due under the decree the suit mortgage is purported to have been executed. I am in agreement with the reasoning and

conclusion of the learned Subordinate Judge as regards the fraudulent nature of Exhibit A-1.

The question, however, that is raised by Mr. Gopalaswami Ayyangar is that a transfer of any immovable property made with intent to defeat and

delay the creditor can be set aside only in a suit instituted by a creditor on behalf of the general body of creditors after obtaining leave under Order

1, Rule 8, CPC and that a transfer is fraudulent within the meaning of Section 53 of the Transfer of Property Act cannot be raised as a plea in

defence as has been done in the present case. The argument is that it is not open to the 2nd defendant to raise any defence that the suit mortgage

was brought into existence with a view to defraud the 2nd defendant''s father, who was a creditor, and that in order to nullify the suit mortgage it

would be necessary for a creditor Or a representative of a creditor to institute a suit u/s 53 on behalf of himself and the general body of creditors, if

there are any, and that the contention is not therefore open to the 2nd defendant as and by way of defence.

Mr. Gopalaswami Ayyangar referred to the judgment of a Bench of this Court in Madina Bibi Sahiba Vs. The Ismail Durga Association and

Another, . The question that arose in that case was whether the creditor decree-holder was obliged to institute the suit on behalf of the general

body of creditors or on his own behalf and it was held on the language of paragraph 4 of Section 53(1) of the Transfer of Property Act that the suit

to avoid a transfer must be on behalf or for the benefit of all the creditors. There is nothing however in that decision to suggest that a plea based on

the principle of Section 53 could not be raised by way of defence.

That it is open to the defendant to raise by way of defence a plea u/s 53 of the Transfer of Property Act was however the view of the Madras

High Court as expressed in the decision of the Full Bench of five Judges reported in N.N.L. Ramaswami Chettiar Vs. Mallappa Reddiar, ,

overruling the earlier Full Bench decision in Subramania Aiyar and Another Vs. A.L.V.R.R.M. Muthia Chettiar (dead) and Others, . That even

after the amendment of Section 53 by the Amending Act of 1929, it would be open to defendant to raise by way of defence a plea u/s 53 of the

Transfer of Property Act has been the view taken by the Allahabad High Court in Lallu Singh v. Chandra Sen I.L.R.(1933) All. 624 , and also by

other High Courts in Bai Hakimbu Vs. Dayabhai Rugnath, , Raja Jagat Kishore Acharjya Chowdhury and Others Vs. Kulakamini Dasya and

Others, , and Purna Chandra Singha Vs. Sarojendra Kumar Dutta, . In K.P. Ramaswami Naick Vs. Lakshmana Kudumban and Another, ,

Venkataramana Rao, J., held that it was not necessary for a creditor to bring a suit to avoid a transaction by a debtor in fraud of creditors but he

could do so by an unequivocal conduct disclosing that he knew of the transaction and treated it as avoided by him. That was a case which arose

after the amendment but whether a defence of this nature would be barred under the language of Section 53, after the amendment was, however,

not examined.

The argument against such a contention being raised by way of defence is based on the language of the 4th paragraph of Section 53(1), which

provides that

A suit instituted by a creditor...to avoid 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.

But Section 53(1) 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.

A creditor who is so defeated or delayed can treat the transfer as voidable and not binding on him. There is nothing in the language of Section 53

expressly depriving him of the option to treat such a transaction as voidable. The option which the creditor has to exercise need not necessarily be

by way of a suit but it can also be by way of defence and it is therefore open to a creditor to treat the impugned transaction as not binding on him.

It is only in the case of a suit instituted by a creditor for the purpose, specific provision is made in Section 53 by providing in paragraph (4) the

form of such a suit. Nothing is said about the defence and a mere mention in the section as to the form of a suit for the purpose would not take

away the substantive right of a defeated creditor to plead the non-binding nature of a fraudulent transfer.

Further when a transaction is attacked as fraudulent, the plea of fraud has to be gone into, as no Court can ignore a document which on its

finding is a fraudulent transaction brought with intent to defeat, in this case, a creditor, and refuse to examine the plea of fraud and permit it to be

enforced without going into the question as to whether the plea of fraud has been substantiated or not. If the document is found to be a fraudulent

one, the Court will virtually be assisting the plaintiff in enforcing such a fraudulent document and so the plaintiff in the circumstances cannot seek the

aid of the Court for the purpose. The substance of the plea being fraud and the same having been raised must be allowed to be examined and if the

fraud is established, the Court should refuse a decree. There is nothing in the language of Section 53 even as amended barring the defendant from

raising the plea on the principle of Section 53. In either view, I am of opinion that the plea u/s 53 is open to the defendant in a suit of this nature,

where the plaintiff seeks to enforce a mortgage which is attacked as a fraudulent transfer. As regards the finding of fraud, I am not persuaded to

differ from the lower appellate Court, which has given cogent reasons for coming to that conclusion.

The result is, the appeal fails and is dismissed with costs.

No leave.