State vs Narayani Parvathi and Others

Vithayathil, J.—Defendant, Travancore-Cochin State, is the Appellant in this case.

The suit is for declaration of Plaintiffs'' title to the plaint property, for recovery of possession of it from the Defendant who has taken possession of it u/s 25, Travancore Revenue Recovery Act and for a permanent injunction restraining the Defendant from selling the property tinder that Act. The first Plaintiff is the widow and Plaintiffs 2 to 4 are the children of one Ayyappan Ummini who is dead.

The plaint property belonged to Ummini. Ummini executed a gift deed, Ex. B, in respect of the property in favour of his wife and children on 7-12-1105. Ummini had bid a toddy shop for the years 1106 and 1107 but he failed to deposit the security amount and to execute the necessary agreement. The shop was therefore resold and in the re-sale Government incurred a loss of Rs. 1053-8-0. For this amount Government attached the property in 1110 under the Revenue Act, assumed management of it u/s 25 of the Act and let it on Kuthakapattom.

The Plaintiffs objected to the attachment contending that Ummini had no right in the property. The objection was overruled and steps were taken for selling the property under the Revenue Recovery Act. It was under these circumstance that the Plaintiffs filed this suit for the reliene mentioned above.

The Defendant contended that the gift deed Ex. B, was a sham transaction, that it was fraudulently executed Ummini with the object of defeating the State and that the property was liable to be proceeded against for the amount due to the State from Ummini.

It was also contended that the suit was barred by limitation. This last plea was, however, notpressed by the Defendant at the time of hearing. The trial Court held that Ex. B, was a valid gift and that it was not executed for the purpose of defeating the State. The suit was, therefore decreed with costs.

The two questions that arise for decided in this appeal are (1) whether the gift deed, Ex. B took effect and (2) if it took effect, whether it was executed with intent to defeat or delay, the creditors of Ummini. So far as the first question is concerned we have only to see whether the gift was accepted by the donees.

Under Section 122, T.P. Act a gift is complete when it is accepted by or on behalf of the donee Section 122 reads:

Gift is the transfer of certain existing moveble or immovable property made voluntarily and without consideration, by one person, called the donor, to Anr. , called the donee, and accepted by or on behalf of the donee. Such accepted tance must be made during the lifetime of the donor and while he is still capable of giving If the donee dies before acceptance, the gift is void.

There is ample evidence in this case to show that the gift was accepted by the donees. (After persuing the evidence, his Lordship proceeded):

It is clear from these facts that the gift took effect and that the donees were holding the property in their own right.

The fact that Ummini was living in the property even after the execution of the gift deed does not go to show that the gift did not take effect Ummini had no other house and it was only natural that he should live with his wife and children.

It was argued for the State that there is provision in the gift deed that the donees should maintain Ummini and that it goes to show the Ummini continued to be the beneficial owner of the property. We do not think that this provision amounts to anything more than the express of a pious wish. No right in the property is (SIC) served in favour of Ummini under the gift deed It has been held by this Court that a direction in a gift deed that the donee should maintain the donor till his death will not make the gift conditional one if the terms of the gift deed show that there has been an absolute transfer of the property in favour of the donee and that such a direction will be regarded only as an expression of pious wish on the part of the donor vide ''Subramonya Iyer v. Sankara Iyer'' AIR 1952 Trav C 47 (A).

The next question for decision is whether the gift, Ex. B, is voidable u/s 53, T.P. Act on the ground that it was executed with intent to defeat or delay the creditors of Ummini.

Learned Government Pleader relied on certain circumstances to show that Ex. B was executed with intent to defeat the State. According to the learned Government Pleader Ummini was a debtor of the State at the time of executing Ex. B. Ex. B is a voluntary transfer without consideration in favour of the wife and children of Ummini. There was no apparent necessity to execute the gift deed at that time. The property covered by Ex. B was the only property that Ummini had. Ummini continued to live in the property even after the date of the gift deed.

There was also a provision in the gift deed that the donees should maintain Ummini during his life. The document was registered at Gheppad while the property is situated within the jurisdiction of the Krishnapuram Sub-Registrar''s Office. These circumstances, according to the learned Government Pleader, go to show that the document was executed fraudulently with the object of defeating the State.

Learned Counsel for the Respondents argued on the other hand, that Ummini had no debts at all at the time of the execution of Ex. B and that, therefore, there was no occasion for him to execute a fraudulent document and that the circumstance of the case go to show that Ex. B was a ''bona fide''. Settlement made by Ummini in favour of his wife and children.

It is in evidence that the re-sale of the shop took place on 11.1.1106. There is no evidence in the case as to the date of the first sale. It might have been some time before the date of Ex. B.

But the material question for consideration is whether at the time of execution Ex. B Ummini had reason to believe that he might incur a liability to the State. We do not know when he was bound to deposit the security amount and to execute the agreement for conducting the shop. The Plaintiffs'' case is that it was because of the prohibition movement that Ummini refrained from conducting the shop. There is no knowing when this movement was started. If the movement was started before the date of the first sale there was no reason to believe that the shop would fetch a lesser amount on resale. It is only if the movement was started after the first sale that it can be supposed that Ummini would have anticipated that the Government might be put to some loss on resale of the shop and that he might thereby incur a liability to Government. If the movement was started after the date of Ex. B and if it was after the execution of that document that he decided not to conduct the shop it cannot be said that at the time of executing the gift deed he had reason to believe that he might incur a liability to the state.

In the absence of any evidence relating to these matters it cannot be held that Ummini knew at the time of executing Ex. B that he would incur a liability to the State and that he executed the gift deed for the purpose of defeating the State. The Appellant has no case that at the time of executing the gift deed Ummini had any other liability. It is true that it is not necessary that a person should be actually indebted at the time of making a voluntary transfer in order to bring it u/s 53, T.P. Act. If the transfer is made for the purpose of defeating or delaying prospective creditors it will be voidable at the option of such creditors. But the question is whether Ummini knew at the time of executing Ex. B that he was going to incur a liability to the State.

As stated already, there is no evidence in the case to support the inference that Ummini had such knowledge at the time of executing the document. If it was owing to events that happened after the execution of the gilt deed that Ummini found himself unable to conduct the shop and thereby incurred a liability to the State it cannot be said that his object in executing, the gift deed was to defeat or delay the State.

Certain circumstances were relied on by learned Counsel for the Respondents to show that Ex. B was a ''bona fide'' transaction and that it was not executed with any fraudulent intention.

(His Lordship went through these circumstances and continued:). In the circumstances mentioned above we are inclined to take the view that Ex. B is a ''bona fide'' transaction and that it was not executed with the object of defeating or delaying the State.

Reference may be made in this connection to the following observation of Tekchand J. in ''Mahomad Ishaq v. Mahomad Usaf'' AIR 1927 Lah 420 (B)

In cases where there are debts due at the time of a gratuitous, transfer, it will be presumed, as has been pointed out by my learned brother, that the transfer was made with intent to defeat or delay the creditors. But where there are no debts due at the time and the transferor runs into indebtedness subsequently, the presumption will be regulated by the peculiar circumstances of each particular case. If, for instance, the transfer was made to ward off the effects of a threatened litigation or in anticipation of the transferor embarking upon a commercial venture1 or on the eve of his going into trade the intent to defeat or delay future creditors will be presumed. But in other circumstances, the transaction will be presumed to be ''bona fide'' and it will lie on the future creditors to prove that the transfer was made with intent to defeat or delay, them. In my opinion, a voluntary settlement by person, who owes no debt at the time, in favour of his children for natural love and affection cannot be set aside merely because some'' years afterwards it is proved to have the effect of defeating or delaying the subsequent creditors.

The learned Judge quoted the following passage in Story''s Equity Jurisprudence, Vol. I, S. 361 where the learned author has summed up the law on the subject in the words of Chancellor Kent:

Fraud in a voluntary conveyance is an inference of law in so far as it concerns ''existing'' debts, but there is no such legal presumption as regards subsequent debts. There must be proof of positive fraud in fact, to vitiate a voluntary conveyance.

Reference was also made by the learned Judge to the following passage in May''s Fraudulent Conveyances and Dispositions of Property:

Where the settior was not indebted at the time, the ''onus'' of proving the fraud is thrown on those who impeach the settlement, for fraud is not to be presumed...The mere fact of subsequent indebtedness is not evidence of a fraudulent intent against subsequent creditors.

This case was followed by the Lahore High Courts in ''Mt. Bibo v. Samburan Singh'' AIR 1936 Lah 222(C).

In Bhikabai Ghatu Bhange Vs. Goja Mhaku Bhange, Chandavarkar J. made the following observation with reference to a gift deed executed under similar circumstances:

It was not the case of a man who had creditors unsatisfied and to defeat whom the voluntary transfer was made, or of a man who, having paid creditors then existing, intended to embark on some new business, and conveyed his property voluntarily for the purpose of screening, it from the probable creditors of the business...There having been no indebtedness at the time of its execution, all existing debts having been paid off before its execution, and the consideration being natural love and affection, which the law regards as good, the case falls within the principle laid down by Ranade J. in ''Sadashiv v. Trimbak'' 23 Bom 146 (E) that no ''mala fides'' can be presumed merely from the possibility that the settlement might prejudice the claims of subsequent creditors.

In ''Re Kelleher'' (1911) 2 Ir. R. 1 (F), it was held that in the absence of any express intention to defraud, a voluntary deed could not be set aside at the instance of a creditor whose debt came into existence after the date of the deed.

This case was followed by Wazir Hasan C.J. and Srivastava J. in AIR 1931 134 (Oudh) We have seen that at the time of the execution of the gift deed Ex. B Ummini had no creditors and that there is no evidence in the case to show that he had reason to believe at that time that he would incur a liability to the State.

In the circumstances we find no reason to disagree with the finding of the court below that the gift deed, Ex. B, was not executed by Ummini with the object of defeating or delaying the State. We, therefore, confirm the judgment and decree of the learned District Judge and dismiss the appeal with costs.