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PETITIONER: C.   ABDUL SHUKOOR SAHEB

       Vs.

RESPONDENT: ARJI PAPA RAO AND OTHERS

DATE OF JUDGMENT: 14/11/1962

BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA DAS, S.K. SUBBARAO, K.

CITATION:  1963 AIR 1150            1963 SCR  Supl. (2)  55

ACT: Fraudulent Sale-Sale effected to defeat  creditor-Attachment of property sold--Rejection of purchasers claim-Suit to  set aside  claim order-Plea of fradulent sale  in  defence-Main- tainabity-If   such   plea  could  be  raised  only   in   a representative  suit by creditors-Transfer of Property  Act, 1882  (4 of 1882), s. 53 (1)-Code of Civil  Procedure,  1908 (Act 5 of 1908), O. 1, r. 8, 6. 21, rr. 58 to 63.

HEADNOTE: The appellant purchased the suit property under a sale  deed executed by defendant 4 on May 20, 1949.  Defendants 3 and 4 had  been doing business in partnership, which,  how.  ever, was  dissolved on March 31, 1949.  The deed  of  dissolution showed that the partnership owed debts to the extent of  Rs. 2-1/2  lakhs  and  that the suit property  was  allotted  to defendant 4. The first respondent to whom money was due from the partnership obtained a decree on june 19, 1951, and  had the  suit  property attached.  The appellant filed  a  claim petition  for raising the attachment but it  was  dismissed. He  then  instituted a suit to set aside the  summary  order under  O.  21, r. 63, of the Code of Civil  Procedure.   The first  respondent’s defence, inter alia, was that  the  sale was  fraudulent intended to defeat or delay. creditors  and, therefore,  was invalid under s. 53 (1) of the  Transfer  of Property Act, 1882.  The appellant pleaded that on a  proper construction  of s. 53 (1) of the Act, a transfer which  was voidable  under  the  section could be  avoided  only  by  a representative suit filed on behalf of creditors and not  by an  individual creditor by way of defence to a suit  to  set aside  a claim order.  The evidence in the case showed  that the  appellant was not a transferee in good faith  and  that the  transferor itself was a scheme by the  transferor  with the  knowledge and concurrence of the transferee to put  the property out of the reach of the creditors. Held  : (1) that s. 53 (1) of the Transfer of Property  Act, 1882, rendered a transaction voidable at the instance of the creditors  if the transfer was effected with the  particular intent specified and that the statute did not prescribe  any particular method of avoidance.  There was nothing in s.  53 (1), as

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56 it  originally stood before the amendment of the section  in 1929, which precluded a defence by an attaching creditor  to a  suit  to set aside a summary order under O. 2 1,  r.  63, Code  of  Civil Procedure, that the sale in  favour  of  the plaintiff was vitiated by fraud ; and the amendment made  no change in this matter. (2)  that it was merely to have a uniform rule and to  avoid conflicting decisions that the third paragraph was  inserted in  s. 53 (1) so that after the amendment, the rule  that  a suit  by  a creditor should be brought in  a  representative capacity  would  apply  as much to a suit  to  set  aside  a summary order under O. 21, r. 63, as to other suits. (3)  that the terms of s. 53 (1) were satisfied even if  the transfer did not "defeat" but only "delayed" the  creditors. The fact that the entirety of the debtor’s property was  not sold  could not by itself negative the applicability of  the section  unless it was proved that there was other  property left, sufficient in value and of easy availability to render the alienation in question immaterial for the creditors. Ramaswami  Chettiar v. Mallappa Reddiar, (1920) I. L. R.  43 Mad., 760, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 164 of 1962. Appeal  from the judgment and decree dated june 19,1958,  of the  Andhra  Pradesh High Court in Appeal Suit  No.  944  of 1953. K.   Bhimasankaram,    J.   V.   Kriahna   Sarma   and    T. Satyanarayana, for the-appellant. A.   Ranganadham Chetty, Miss A. Vedavalli, N.    Rajeshwara Rao and A. V. Rangam, for respondents 1 (a) and (b). 1962.  November 14.  The judgment of the Court was delivered by AYYANGAR, J.-This appeal comes before us on a certificate of fitness  granted by the High Court of  Andhra  Pradesh-under Art. 133(1)(a) of the Constitution. 57 The following facts are necessary to be stated to apperciate the  contention-, urged before us.  We consider it would  be convenient  to  refer to the parties by their array  in  the trial Court.  The 2nd defendantfirm Hajee Abdul Kadir  Sahib and Lala Batcha Sahib & Co., had been apparently carrying on business in several places including Vizianagaram,  Bellary, Madras  etc.,  in  skins  and  hides  since  1941  when  the partnership   was  formed  between  the  3rd  and  the   4th defendants.   It was common ground that from about  1947  or 1948   the  firm  had  not  been  doing  any  businesss   in Vizianagaram  and  by that time it had  contracted  quite  a large volume of debts, the tannery business there proving  a loss.   The two partners accordingly entered into a deed  of dissolution dated March 31, 1949, in which it is stated that the  book-debts,  stock in trade, immovable  properties  and other assets including the goodwill of the firm were of  the value  of  Rs.  2,90,000/-, and at the same  time  that  the partnership  which was admitted to be suffering losses  owed debts  to  the extent. of Rs. 2-1/2 lakhs.  It’  was  agreed between  the partners that the 3rd defendant  Abdul  Shukoor Saheb  should go out of the partnership taking with him  one item  of  property  in Vaniyambadi valued  at  Rs.  20,000/- while-  the suit tannery which was estimated as of the  same value  was to become the sole property of the 4th  defendant who  was described in the deed as "the continuing  partner".

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Soon  after  this  deed of  dissolution  the  4th  defendant entered into an agreement with the plaintiff for the sale to him  of  the suit property for a sum of  Rs.  19,000/-,  and later  executed  the  deed of sale on  May  20,  1949.   The plaintiff  was, however, advised that it would be  safer  to have  the  conveyance in his favour executed  by  the  other partner  also and accordingly the 3rd defendant was also  an executant  of the sale deed.  On the execution of  the  sale deed the plaintiff entered into possession and he claimed to have thereafter effected improvements to the property. 58 While  so, the 1st defendant-Arji Papa Rao-filed suit O.  S. 46   of   1950  in  the  Court  of  subordinate   judge   at Visakhapatnam  for the recovery of a sum of  Rs.  12,950/5/8 against the 2nd defendant firm and its partners defendants 3 & 4 and obtained a decree for the sum claimed with  interest and costs on June 19, 1951.  Soon after filing the plaint he obtained an order for attachment before judgment of the suit property  and  that order was on the passing of  the  decree made  absolute,  subject however, to the result of  a  claim petition  which had been filed by the plaintiff for  raising the  attachment.   The Subordinate  judge  of  Visakhapatnam dismissed the plaintiff’s claim and this has led to the suit O.  S.  145 of 1951 out of which this appeal arises  to  set aside that summary order under O. XXI, r. 63, Code of  Civil Procedure.   The plaintiff impleaded as parties to the  suit besides  the  attaching decree-holder who was made  the  1st defendant,   the  debtor-firm  and  the  two   partners   as defendants  2  to  4 respectively and the  son  of  the  4th defendant  who executed the sale deed as his agent  under  a power of attorney as the 5th defendant. The  plaintiff  claimed  that  he  purchased  the   property bonafide and for its full value, that since its purchase  he having entered into possession, ’was in enjoyment thereof in his  own right, paying the rates and taxes due  thereon  and had   effected  valuable  improvements  thereto,  and   that consequently  the property was not liable to be attached  as belonging to the partnership or any of its partners. Broadly  stated, the defence of the 1st defendant  the  only contesting  defendant, the others either remaining ex  parte or supporting the plaintiff, was that the sale in favour  of the  plaintiff was either a sham and nominal transaction  or in  fraud of creditors of whom he was one.  The trial  court upheld the plaintiff’s claim that the sale was real and  was fully 59 supported   by   consideration.   It  also   negatived   the contention raised by’ the first defendant that the sale  was fraudulent as intended to defeat or delay creditors under s. 53  (1) of the Transfer of Property Act.  The 1st  defendant filed  an  appeal to the High Court and the  learned  judges reversed  the decision of the trial-judge and  directed  the dismissal of the plaintiff’s suit.  It is the correctness of this decision that is challenged in this appeal. Learned  counsel  for the appellant  raised  four  principal points  in  support  of the appeal : (1) that  on  a  proper construction  of  the written statement the  only  real  and effective  defence  that  was raised was that  the  sale  in favour  of the appellant was sham and nominal and  that  the Courts  below were in error in proceeding on the basis  that the sale was in the alternative impugned as brought about to defeat  or delay creditors within s. 53 (1) of the  Transfer of Property Act; (2) that on the facts and circumstances  of the case it had not been established that the sale in favour of  the  appellant was vitiated by fraud  against  creditors

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falling  within s. 53 (1) of the Transfer of  Property  Act; (3) that in any event, the plaintiff was a purchaser in good faith  and  for  valuable consideration  and  was  therefore protected even on the basis that the transferor intended, by the  alienation,  to defraud his creditors; (4)  that  on  a proper construction of s. 53 (1) of the Transfer of Property Act,  as it now stands, read in the light of the  provisions of  the Code of Civil Procedure particularly those  relating to  claim  petitions under O. XXI rr. 58 to 63,  a  transfer which was voidable under s. 53 (1) could be avoided only  by a  representative suit filed on behalf of creditors and  not by an individual creditor who may be defeated or delayed, by way of defence to a suit to set aside a summary order  under O. XXI, r. 63, Code of Civil Procedure. We  shall deal with each of these points and in that  order. There is no  doubt that the written 60 Statement has not been artistically drafted, keeping in view the  real distinction between a sham and nominal sale  which is  not intended to pass title and a sale which is real  but which  is voidable at the instance of creditors because  the transfer  is  intended in the language of s. 53 (1)  of  the Transfer  of Property Act "to defeat and  delay  creditors". In  paragraph 2 of the Written Statement the  1st  defendant stated :- ,               "The  said  sale  deed is  sham;  nominal  and               collusive  document not intended to  pass  any               title  but  brought about to screen  the  suit               properties from the creditors of defendants  2               to  5. No consideration passed under the  sale               deed and the recitals thereof in the  document               are fictitious and make-believe."               The paragraph. however, further went on to add               "It is further submitted that even if the sale               deed  is  true, it, is in fraud  of  creditors               including  the  plaintiff and not  binding  on               them." In  paragraphs 3 the allegation was made that the  plaintiff was  the relative of defendants 2 to 5, that  the  plaintiff and the vendors were natives of the same place and that  the sale deed was clandestinely brought into existence at Madras at a. time when defendants 2 to 5, were hard-pressed by  the plaintiff  and  other  creditors  and  unable-to  pay  their debts.,  at  V,izianagaram  and that in  order  to  put  the properties beyond  the reach of the creditors, defendants  2 to;  4  seem  to, have hit upon the frauds  device.  of  the alleged  We  to  the  plaintiff".  In  the  light  of  these averments  it, cannot be-, said that the defendants did  not raise  two  distinct pleas (1) that the sale was a  sham,  a pretended Sale without any consideration and not intended to pass  any  title  to  the  nominal  purchaser  and  in   the alternative (2) that even if it were a 61 real transaction supported by consideration and intended  to pass  title  to the plaintiff, still the  same  was,  having Tegard  to  the  circumstances  stated,  a  fraud  upon  the creditors  and therefore voidable at his  instance.   Though the pleading in the Written Statement was in this form,  the issues  struck  did not raise the two defenses  as  distinct pleas but rolled both of them into a single plea raising the question  "whether  the  plaintiff hid  title  to  the  suit property  and whether the claim order was liable to  be  set aside." Notwithstanding  the  indefiniteness  in the  frame  of  the issues it could not be said that when the parties  proceeded

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to  adduce  evidence the same was not directed to  both  the above  defences.   As we have necessarily to  consider  thus evidence  in  dealing  with  the  submissions  made  to   us regarding   the   correctness  of  the  dismissal   of   the plaintiff’s suit by the High Court it is unnecessary to  set out  the  details of the evidence which indicates  that  the defence based upon s. 53 of the Transfer of Property Act was borne  in mind.  At the, stage of the arguments  before  the trial  Judge it was the subject of keen contest between  the parties.   The  learned  trial judge first  dealt  with  the question  as to whether the sale was real as pleaded by  the plaintiff  or whether it was without consideration and  sham and nominal not intended to pass any little, and recorded  a clear  finding in favour of the plaintiff After having  done so  he considered in detail the various circumstances  which were relied on by the first defendant in support of the plea that the sale was in fraud of creditors so as to be voidable under.  s.  53(1)  of  the Transfer  of  Property  Act.   He negatived this plea and upheld the plaintiff’s claim to  the Property  and  passed  a decree in  his  favour.   In  these circumstances  we  consider that there is no  force  in  the objection  that  there has not been a sufficient plea  of  a defence based upon s. 53 of the Transfer of Property Act  as to  justify  or  entitle  the  court  to  afford  relief  if satisfied that the same was proved. 62 Before dealing with the second point it is necessary to make a  few observations in relation to certain submissions  made by learned Counsel for the appellant.  This was in  relation to the manner in which the. learned judges of the High Court had  approached  this question and arrived at  a  conclusion adverse  to his client.  The learned judges  had  formulated the questions to be considered in the appeal as follows :-               "The main point that falls to be considered in               this appeal is whether the sale deed in favour               of  the Plaintiffs Exhibit A-2, is  a  genuine               transaction  supported by consideration;  and,               if  on this point the finding is in favour  of                             the plaintiff, the further question that falls               to be determined is whether the suit sale-deed               was executed in fraud of creditors and as such               not  binding on the first defendant and  other               creditors  of  defendants,  2  to  5.  If  the               finding on this issue is that the  transaction               was  in  fact in the fraud of  creditors,  the               further   question   that  would   arise   for               consideration  is whether the plaintiff  could               claim  to be the transferee in good faith  and               for  consideration so as to claim the  benefit               of  the exemption contained in section  53  of               the Transfer of Property Act. Learned Counsel had no quarrel with the propositions as here set out or the mode of approach, but his complaint was  that in dealing with the appeal these were not kept in view.   He urged  that they did not consider either initially  or  even later  the question as to whether the sale to the  plaintiff was   real   or  was  sham  and   nominal   unsupported   by consideration  and though they stated in one portion of  the judgment that they did not propose to consider this question because  they were satisfied that the decision on the  other points might be sufficient to dispose of the appeal,yet they made  passing observation which appeared to throw  doubt  on the reality of the sale.                              63 Again,  learned  Counsel pointed out that  though  they  had

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formulated the two questions viz., (1) assuming the sale  to be  real whether the sale was intended by the transferor  to defeat  or  delay creditors, and (2) assuming the  sale  was voidable  under  s. 53(1) of the Transfer  of  Property  Act whether  the  plaintiff was a bona fide  purchaser  in  good faith, as distinct and separate questions, in the discussion which followed they did not keep these two points  separate. Besides,  it was urged that there were  some  statements  or assumptions  made in the judgment which were  entirely  not, warranted  by  the facts.  We cannot say that there  is  not some  force  in  these submissions.  In view  of  this,  the course  which  we intimated to the teamed  Counsel  that  we would adopt was that we would ourselves consider the  entire evidence on the record and arrive at our own conclusions  on such  evidence in regard to the two issues: (a) whether  the sale  was  in  fraud  of  creditors,  and  (b)  whether  the plaintiff was a bona fide purchaser for value and that if it became  necessary  to arrive at any finding as  regards  the reality of the sale, we would remand the appeal to the  High Court  for  the matter being considered  since  the  learned judges  had  expressly reserved the  consideration  of  that question. We shall now proceed to consider the facts and circumstances of  the case which are relevant to the issue as  to  whether the  sale was to defeat or delay creditors.  There was  some argument  before us about the burden of proof in such  cases but  learned  Counsel for the appellant  submitted  that  he would  assume for the purpose of argument that the onus  was upon  the plaintiff-purchaser and that he would  satisfy  us that  burden had been discharged.  This apart,  we  consider that  the  question of onus of proof is merely  academic  at this  stage  because the entire evidence is  before  us  and except  in a rare case where the considerations  are  evenly balanced, it would have little significance. 64 The  circumstances which are relevant for the  consideration of this question are these: The second defendant-firm was in financial  embarrassment at the time of the sale.  The  deed of  dissolution  dated  March  31,  1949  recites  that  the business carried on by the firm was resulting in losses  and that the debts amounted to about 2-1/2 lakhs of rupees.   No doubt,  it is there stated that the assets of the firm  were by  consent  of the parties estimated of the  value  of  Rs. 2,90,000/-.  This estimate however included the value of the goodwill,  which would not be of any real value in the  case of  a  losing business of this sort and we do not  know  how much  was attributed to this item.  This apart,  the  assets were  said  to  be made up of book-debts,  stock  in  trade, immovable property etc.  There is however, no indication  as to  the relative value of these several components to  judge whether  or  not the alienation of the suit  property  would have the effect of delaying, if not defeating the creditors. It can however be asserted that the picture presented by the deed  of dissolution is certainly of a firm whose  financial position was far from satisfactory.  There is no evidence on the  record whether the partners or either of them  had  any property of their own besides the assets of the  partnership for  discharging  the  debts due to  the  firm’s  creditors. Though   the  4th  defendant  filed  a   written   Statement supporting  the plaintiff, the plaintiff did not  choose  to examine  him as a witness in order to elucidate this  matter or otherwise explain the circumstances in which the impugned sale’ was effected. The next feature to be noticed is that the plaintiff and the 4th  defendant  were  both members of  the  same  community-

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labbais  of North Arcot district, a fairly small  and  well- knit community several of whom are engaged in the hides  and skins  business.  The learned judges of the High Court  have referred  to the plaintiff and the 4th defendant as  natives of ,the same place and as relatives.  Learned Counsel 65 for the Appellant pointed out that whereas the-4th defendant was  a native of Vaniyambadi, the plaintiff was,  native  of Parnambet  and the suggestion made that they were  relatives had been denied,-in the evidence.  Learned Counsel might  be right  on these matters but we consider that not much  turns on  them.  Both of them were conducting business  in  Madras and the plaintiff had also a business in Vizianagaram though it  was  in  bidis and not in hides  and  skins.   In  these circumstances  we  consider that it matters  little  whether they  were  relatives  or  not.   The  significance  of  the ’plaintiff  and  his  vendors  being  members  of  the  same community  and  well-known to each other consists  in  this, that  the  plaintiff might have been chosen because  of  his willingness  to take the sale without any searching  enquiry as  to the circumstances necessitating it,and because  there would be less publicity in the transaction being put through between them-such as for instance inspection of the property or  enquiries in the locality as regards value  etc.,  which would  take place if the sale was to be to a total  stranger which would attract the attention of the firm’s creditors. The next circumstance is as regards the pressure exerted  on the  3rd  and 4th defendants by  the  creditors  immediately prior  to the impugned sale and which, in the normal  course of events, would be relevant, as providing that the sale was effected  in order to put the property beyond the  reach  of creditors by converting it into cash.  On April 20, 1948, O. S. 162 of 1948 on the file of the District Munsiff’s  Court, Vizianagaram was filed for the recovery of Rs. 1,016/- on  a promissory  note  for Rs. 1,000/executed by  the  firm.   On September 8, 1948, it was reported as adjusted out of court. Besides this some other suits were filed for the recovery of amounts  ’from  the partnership but they were  defended  and were ultimately dismissed.  Then we come to 66 O.   S. 191 of 1949 in which the plaint was presented     on April  4, 1949, for recovery of a sum of Rs.  1,385/and  odd which  was decreed with interest and costs on  November  22, 1949.  The date on which this last mentioned suit was  filed is  of some significance because of another suit  which  was filed  at  about the same time.  One Damayanti  presented  a plaint  on March 9, 1949, against the firm for the  recovery of  Rs-. 3,000/- being the principal and interest due  on  a promissory  note.  The date fixed for the appearance by  the defendant  was April 4, 1949.  It will be noticed  that  the deed  of  dissolution was executed on March 31,  1949.   The defendant did not enter appearance on the day fixed and  the Court  passed an ex parte decree on April 5, 1949;  for  the amount  claimed.  She filed an application for execution  on April 18, 1949, and obtained an order on April 21, 1949, for the  attachment of the suit property though  the  attachment was actually effected on June 8, 1949, because the court was closed for the summer vacation.  Long before these dates the 4th  defendant  had made up his mind to  alienate  the  suit property and we have a letter from the 4th defendant to  the plaintiff  as  early as February 5,  1949,  which  evidences negotiations  for  the  sale of  the  property.   There  was apparently  some giggling about the price which caused  some delay  and a few days after the attachment was  ordered,  on April 27, 1949, a formal agreement of sale was entered  into

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between               the  plaintiff and the  4th  defendant under which he agreed to purchase the property for a sum  of Rs. 19,000/and the agreement recited that the purchaser,  i. e., the plaintiff had paid a sum of Rs. 10,000/- in  advance as  earnest money and the sale deed itself was  executed  on May  20,  1949.  In pursuance of the order dated  April  21, 1949, Damayanti attached the suit property as already stated on  June 8, 1949 and thereupon the plaintiff filed  a  claim under  O. XXI, r, 59, Code of Civil Procedure,  for  raising the 67 attachment but this, however, was dismissed on November  16, 1950, and thereafter the amount of the decree was paid up by the  judgment-debtor just a few days before tile  expiry  of the one year period of limitation for filing the suit  under O.  XXI, r. 63, Code of Civil Procedure.  A  suggestion  was made to the plaintiff while he was examined in the case that it  was he who had paid up the decree debt of Damayanti  but he denied it and we shall proceed on the basis that debt was discharged  by  the judgment-debtors  themselves.   For  the purpose  of establishing that the firm was hard  pressed  by its creditors at the time of the negotiations which resulted in the sale impugned in these proceedings and at the time of the sale, it matters little who paid this decree-debt. Next  we  have the circumstance that though  the  properties were at Vizianagaram, the document was registered at  Madras and  the suggestion made to the plaintiff was that this  was meant  as a measure of secrecy to keep this alienation  from the  knowledge  of the firm’s  creditors.   The  explanation offered  by  the  plaintiff was that having  regard  to  the distance  between the native places of the two parties  from Vizianagaram  and the proximity of these to Madras  and  the fact that both the Plaintiff, as well as the executants were at Madras it was found more convenient to have the  document presented  for registration at Madras instead  of  incurring the  expenses  of  a journy to Vizianagaram  for  having  it registered  there.   The learned trial judge  accepted  this explanation and held that the registration of the sale  deed at  Madras was not a suspicious circumstance  indicating  an intention  to  keep  the transaction  secret.   The  learned judges  of the High Court, however, considered it  otherwise and  expressed the view that this was done in order to  keep the  transaction secret.  We are inclined to agree with  the learned judges of the High Court 68 in  their appreciation of this piece of  conduct.Admittedly, the  4th  defendant  had  his  agent  at  Vizianagaram   and similarly the plaintiff himself had his men there to    look after’ his, bidi business.  There was no impediment in these circumstances and no expenses of traveling involved if  only the  4th  defendant had executed a power @  of  attorney  in favour,of  some one at Vizianagaram to present the  document for  registration and admit its execution.  In fact, it  may be  mentioned  that  even the sale  deed  now  impugned  was executed  not by the 3rd and 4th defendants but by  the  4th defendant’s  son-K.   L. Abdulla in whose favour  a  general power of attorney was executed on April 26, 1949, apparently immediately the agreement for sale was concluded.  It is  in the  light  of  this feature that we  are  not  disposed  to dismiss as irrelevant the circumstance that the document was registered at Madras. The  next  feature  of the case to  which.  we  must  direct attention  relates  to the purpose for which  the  sale  was executed.   As  regards this, there is no  evidence  led  to indicate  why  exactly the 4th defendant desired  with  some

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urgency  to dispose of the property at that  juncture.   The relevant circumstance in the present case is that there  was a great deal of pressure from creditors, who not having been paid  the amounts due to them as and when they  became  due, were forced to file suits and those which were decreed  were those which were not defended and the firm was mulcted  with costs under each of these decrees.  In the circumstances one would  expect  an explanation as to why the sale  was  being effected.  Ordinarily in circumstances such as in this  case there  could only be two alternatives : (1) a sale in  order to pay the creditors out of the proceeds obtained; and (2) a sale  in’  order  to convert immovable  property  which  was capable  of  being  attached and brought  to  sale  for  the realisation of the amounts due to the creditors 69 into  cash, which could either be secreted or used  for  the vendor’s own purposes.  If the purpose was as that indicated in  the first of the above alternatives the proceeds of  the sale would have been earmarked for the payment of particular debts  for which pressure Was the greatest.  It is  needless to add that if this were the case and if creditors who  were not so provided were defeated or delayed it would merely  be a  case of a fraudulent preference which could  be  impugned only under the law relating to insolvency and not as a fraud on creditors for which s. 53 of the Transfer of Property Act makes  provision.  It is, however, common ground that  apart from  the  sale  deed  not making  any  provision  that  the consideration  was to be utilised for the discharge  of  any particular  debts, it is not the case of the plaintiff  that there was any such stipulation as to the application of  the money or that without any stipulation therefor the money was so  utilised.   It would therefore not  be  an  unreasonable inference to draw from the circumstances of the tale at  the Juncture at which it took place that the Vendor’s object was merely to convert this immovable property into cash, so that it may not be available to the creditors. Before  leaving this point it is necessary to advert to  one matter  which  was  suggested by  learned  Counsel  for  the appellant.   He submitted that the property sold was only  a part of the assets of the partners and that unless there was evidence  to  show that nothing was left available  for  the creditors after the impugned sale, its validity could not be impugned  under s. 53 of the Transfer of Property  Act.   We consider  that there is no force in’ this submission.  As  a matter  of  fact,  there is no evidence  as  to  what  other properties the partners had beyond what ’is contained in the deed of dissolution on March 31, 1949.  But that apart,  the terms  of s. 53(1) are satisfied even if the  transfer  does not "’defeat" but only "delays" the 70 creditors.   The  fact therefore that the  entirety  of  the debtors’ property was not sold cannot by itself negative the applicability of s. 53(1) unless there is cogent proof  that there  is  other property left, sufficient in value  and  of easy  availability  to  render the  alienation  in  question immaterial  for  tie  creditors.  In the  present  case,  as already pointed out, we have no definite, evidence as to the nature and quality of the property left as available to  the creditors after the impugned alienation, and though light on this  could  have  been thrown by the  4th  defendant  being called  as a witness, the plaintiff did not choose  to  take the  step, nor indeed did’ he even summon the production  of the accounts of the firm which might have disclosed the true state of affairs. Each  of  these  circumstances  might  be  capable  of  some

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explanation  consistent with the case that the transfer  now impugned  was effected in the normal and ordinary course  of business by the 4th defendant for some purpose which did not involve  an intention to defeat or delay his creditors,  but the question we have to consider is their cumulative  effect and  so viewed the conclusion appears irresistible that  the object of the transaction was to put the property out of the reach of the creditors.  The transfer was therefore  plainly within  the terms of the 1st paragraph of s. 53 (1)  of  the Transfer of Property Act and was voidable at the instance of the 1st defendant who was a decree-creditor. The  next question is whether the plaintiff is a  bona  fide purchaser  for  value so as to be protected  by  the  second paragraph of s. 53 (1) reading :               "Nothing in this section impairs the rights of               the   transferee   in  good  faith   and   for               consideration. As stated earlier, the learned trial judge held that the Rs. 19,000/-, the sale price was the full value of 71 the  property and that the consideration as recited  in  the document  was paid by the purchaser.  This finding  has  not been  set  aside  by the High  Court.   We  are,  therefore, proceeding  on  the  basis that the Transfer  was  real  and supported by consideration.  The narrow question is  whether the  plaintiff  was  a transferee in  good  faith.   It  was submitted on behalf of the appellant that the learned judges of  the  High  Court  had  directed  the  dismissal  of  the plaintiff’s  suit even without a definite finding  that  the plaintiff  was  a  party to the fraud on  the  part  of  the transferor to defeat or delay the creditors.  There might be some  force  in this submission that there  is  no  specific finding  to that effect but that does not in any way  assist the appellant.  Where fraud on the part of the transferor is established i. e. by the terms of paragraph (i) of s.  53(1) being  satisfied, the burden of proving that the  transferee fell  within  the  exception is upon him  and  in  order  to succeed  he  must establish that he was not a party  to  the design  of  the  transferor and that he did  not  share  the intention with which the transfer had been effected but that he took the sale honestly believing that the transfer was in the  ordinary and normal course of business.  When once  the conclusion  is reached that the transfer was  effected  with the  intent  on the part of the transferor  to  convert  the property  into cash so as to defeat or delay his  creditors, there cannot be any doubt on the evidence on record that the plaintiff   shared  that  intent.   For  this  purpose   the following circumstances may be pointed out (1)  The  plaintiff  and  the  vendor  belong  to  the  same community, a small, compact and well-knit one and they  must obviously  have  known each other having been in  trade  for several years in several places in common and must therefore have  been  wellacquainted with the financial  and  business affairs of each other. 72 (2)  This general inference apart, the plaintiff  admittedly had  with him a copy of the deed of dissolution dated  March 31,  1949,  which  disclosed that the  firm’s  business  had resulted  in  losses and that it was greatly  indebted,  the debts amounting to Rs. 2-1/2 lakhs. (3)  If  as we have held that registration of the sale  deed at  Madras  was with a view to keep the  transaction  secret from  the creditors, the plaintiff was, as much a  party  to the secrecy as the transferor. (4)  One matter which would be of considerable relevance and

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significance in this connections would be the enquiries that the plaintiff made before he took the transfer.  He no doubt led evidence to show that he consulted his lawyers about the title-of  the vendor; but any attempt at an enquiry  of  the 4th  defendant  as to why he was effecting the sale  of  the only immovable property of the firm which was alloted to him under the-deed of dissolution is significantly absent. In  the  circumstances,  it  stands  to  reason  that;   the plaintiff  must  be  fixed  with notice  of  the  design  in pursuance of which the transfer was effected.  If the object of  a transferor who is heavily indebted was to convert  his immovable  property into cash for keeping it away  from  his creditors  and  knowing  it the  transferor  helped  him  to achieve  that  purpose it has naturally to be held  that  he shared that intention and was himself a party to the  fraud. In  this  connection,  there is one  circumstance  which  is rather significant.  Even when the plaintiff was fixed  with notice  that the firm’s business had been running at a  loss and  had  accumulated  a  very  large  volume  of  debts  as disclosed by the recitals in the deed of dissolution,  which was  placed in his hands, the purchaser did not insist  that the consideration which he was paying should be utilised for the discharge of at least some 73 of the debts.  We are therefore satisfied that the Plaintiff was  not  a transferee in good faith and that  the  transfer itself was a scheme by the transferor with the knowledge and concurrence of the transferee to put the property out of the reach  of the creditors The result therefore would  be  that the  plaintiffs  suit, was liable, to be dismissed  for  the reason  that  the  defence plea invoking s. 53  (1)  of  the Transfer of Property Act was made out. What  remains for consideration is a ;point of law that  was raised  on behalf of the appellant that a transfer which  is voidable under s. 53 (1) of the Transfer of Property Act can be  avoided only by: a suit, filed by a  creditor  impugning the  transfer on- behalf of himself and the other  creditors and not byway of defence to a suit under O. 21,. r. 63, Code of Civil Procedure by a claimant whose application has  been rejected in summary proceedings under O. 21, rr. 58, to  61, Code of Civil Procedure. Section 53 (1) of the Transfer of Property Act, as it stands at  presented  is, as amended by the  Transfer  of  Property (Amendment)  Act (Act 20 of 1929).  As part of the  argument on this head was based on a comparison of the provisions  of the section before and after the same was amended, we  shall set out in parallel, columns s. 53 (1) as it stood before it was. amended in 1929 and as it stands as amended S. 53(1);as it stood before           S. 53 (1) as it stands the Amending Act, 1929          after the Amending Act, 1929 "Every  transfer     of           "Every transfer  of  immov immovable         property     able property made with  made with intent to de,,                intent to defeat or delay fraud prior or subsequent          the    creditors of 1 the 74. S.   53 (1) as it stood before  S. 53 (1) as it standsafter the Ameding Act, 1929. transferees  thereof for consideration or coowners or  other persons having an interest in such property or to defeat  or delay  the creditors of the transferor, is voidable  at  the option of any person so defrauded or delayed. Where the effect of any transfer of immovable property is to defraud, defeat or delay any such person, and such  transfer is  made  gratuitously  or for  a  grossly  inadequate  con- sideration,  the transfer may be presumed to have been  made

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with such intent as aforesaid. Nothing contained in this section shall impair the rights of any transferee in good faith and for consideration." after the Amending Act, 11929. transferor  shall be voidable at the option of any  creditor so defeated or delayed. Nothing  in  this sub-section shall impair the rights  of  a transferee in good faith and for consideration. Nothing in this subsection shall affect any law for the time being in force relating to insolvency. A suit instituted  by a  creditor (which term includes a decree-holder whether  he has  or  has not applied fore execution of  his  decree)  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." Two  points were made by the learned Counsel in  support  of this   submission;  the  first  being  independent  of   the amendment effected by the Act of 1929  75 and  the other based on the provision as amended.The  former was based on the impact of the nature G. of the  proceedings under  O. 21, rr. 58 to 61, Code of Civil Procedure, and  of the  order that would be passed therein and particularly  of the questions that would arise in a suit under O. 21, r. 63, Code of Civil Procedure, to set aside summary orders;  while the latter was based on the amendment by which a  creditor’s suit was required to be in a representative capacity. It  would  be  seen  that so far  as  the  first  point  was concerned,  the  amendment made no change and  that  if  the learned Counsel were right the position would have been  the same even on the section as it stood before it was  amended. It was conceded that on the section as it stood prior to the amendment,   there  was  a  direct  decision  against   this argument,  of  a Full Bench of five 6 judges of  the  Madras High Court as early as 1920 (Ramaswami Chettiar v.  Mallappa Reddiar  (1) which had been consistently followed  by  every other High Court in India up to this date without any  doubt or  dissent.  Gleamed Counsel however urged that this  Court was  not precluded from considering the correctness of  this decision notwithstanding its having held the field for  over forty  years  without  question,  As  a  legal  proposition, Counsel  is undoubtedly right, but the question  is  whether any  reasons  have been adduced before us to  consider  that decision was wrong. We shall be presently setting out the reasoning on which  it is contended that an attaching creditor who has succeeded in the summary proceedings under O. XXI, rr. 58 to 61,  cannot, in  a suit to set aside the summary order under O.  XXI,  r. 63, raise by way of defence the plea that the sale in favour of  the  plaintiff-the transferee-claimant  is  vitiated  by fraud under s. 53(1) of the Transfer of Property Act, but (1)  (1920) 1. I. R. 43.  Mad. 760 76 before doing so it is necessary to point out that this  very argument  was  urged before the Full Bench referred  to  and after elaborate consideration, rejected by them, Now  the argument as regards the inference to be drawn  from the  nature  of the enquiry in the summary  proceedings  for investigating. claims to property which has been attached is briefly  as follows:: s-53 of the Transfer of  Property  Act assumes  that  there, is a real transfer  intended  to  pass title to the transferee but that the transfer is vitiated by fraud which renders it voidable.  In the summary proceedings under O. XXI, rr. 58 to 61, having regard to the terms of r.

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61,  the  Court is concerned only with the  question  as  to whether  the transferee is in possession of the property  in his own right and not on behalf of the judgment-debtor, when a transfer is real, though it is liable to be impeached as a fraud  on  creditors,  and the tranferee  has  entered  into possession,  he  would succeed in the  summary  proceedings, with the result-that it is the defeated attaching  ’creditor who would have to figure as a plaintiffq If he figures as  a plaintiff  the  suit would have to be  in  a  representative capacity,  that  is,  under  O.  1,  r.  8,  Code-of   Civil Procedure.   In  every case, therefore, when a  transfer  is real  but is liable to be set aside under s. 53 (1)  on  the provisions  of  O.  XXI,  rr.  58  to  61,  Code  of   Civil Procedure,the transferee is bound to succeed in the  summary proceedings  and the attaching decree holder would  have  to figure as a plaintiff and the suit would be a representative suit.  From this it is said that it follows that in no  case can an attaching creditor who defends a suit to set aside  a summary order in ’his favour resist it on the plea of  fraud under s. 53(1). It  would  however be seen that, this last  step,  which  is vital for the argument to have force does not follow for the argument  does not proceed on any construction of the  terms of s. 53(1) nor on any legal 77 theory as to the mode or procedure ,by which; the  intention to avoid the transaction which the attaching creditor claims is  voidable at his instance may be expressed  or  enforced. The  argument  would  only  establish  that  if  the   Court investigating  claims  under O. XXI. r. 58  etc.,  conformed strictly  to the terms of those provision is the  transferee under a real sale would succeed in those proceedings and, he would  be a defendant and need ’not be a plaintiff in  suits to  set aside the summary order under O. XXI, r.  63.   This line  of reasoning does not take into account at  least  the following  possibilities: (1) The claim or objection by  the transferee may be rejected, not on :the merits, but  because it  has  been designedly or unnecessarily delayed  (vide  O. XXI,  r. 58, Code of Civil Procedure).  It is certainly  not the  contention  of  learned Counsel that when  there  is  a rejection  of a transferee’s claim under this provision  the order of rejection is any the less final and has  not  to be set  aside by a suit contemplated by O. XXI, r. 63, Code  of Civil  Procedure,  in order to overcome the effect  of  that finality.  (2)  The Court making the summary  enquiry  might come  to an erroneous conclusion that the  transfer  is-sham and not real or that the transferee is in possession for the benefit  of  the judgmentdebtor.  In the suit filed  by  the transferee to set aside’ this erroneous order, the plaintiff would have to establish his title and even if he succeeds in showing  that the sale to him was real and effective,  still the  question  would remain whether, having  regard  to  the circumstances  of  the transfer, the same  is  not  voidable under  s.  53(1).   Thus there would  be  occasions  when  a defeated  transferee  whose transfer is real might  have  to figure as a plaintiff in a suit to set aside a summary order under  O.  21,  r.  63, Code of  Civil  Procedure.  (3)  The attaching   decree-holder   might  raise  in   the   summary proceedings two alternative defenses to a transferee’s claim (a)  that  the sale was sham and nominal and  therefore  the possession 78 of  the  transferee was really on behalf  of  the  judgment- debtor,  and (b) that even if the sale be real and  intended to pastitle it was voidable as a fraud  on  creditors.-   It

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is,  no  doubt,  true that  the second  or  the  alternative defence is not open in the claim proceedings, but if however the  same were erroneously entertained and an order  passed, rejecting  the  claim  of the  transferee,  the  same  would nevertheless be an order which would have to be set aside by a suit by the defeated transferee and he cannot ignore it. It  would thus be seen that the entire argument  as  regards the  impact  of the nature of the enquiry under  O.  21,  r. 59,on  the defences which would be open in a suit  under  O. 21,  r.  63, depends on two factors: (1) the  summary  order being passed on the merits and not because the making of the claim  was designedly or unnecessarily delayed, and (2)  the summary  order  being right on the merits  and  strictly  in conformity to the provisions of the Code. As  we have already pointed out, the points urged before  us as regards the scope of the enquiry into claim petitions was also the subject of elaborate argument and consideration  by the  learned  judges of the Madras High Court  in  the  Full Bench.    Sadasiva  Ayyar,  J.,  classified  the  cases   of transferees  who failed in their claim petitions and had  to file  suits to set aside summary orders under O. 21, r.  63, under  three  heads : (a) -Where the transferee was  a  mere benamidar;  (b)  Where  he was a  fraudulent  transferee  in possession; and (c) Where he was a fraudulent transferee not in possession.  The learned Judge said :               "A  creditor  decree-holder, who  is  in  most               cases   a  stranger,  cannot   reasonably   be               expected to know of his own knowledge  whether               a transfer               79               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 he is               so  for him self or for  the  judgment-debtor.               He  would  therefore’  usually  both  in   the               claimpetition and in the suit which afterwards               arises out of the order against the  claimant,               be  obliged  to  raise  and  be  justified  in               raising  alternatively all the pleas  open  to               him,  and  the Court which decided  the  claim               against the claimant might, in its conclusions               on  each of the three points, be either  right               or wrong." He further pertinently pointed out that to hold that a  plea based  on the transfer being voidable under s.  53(1)  could not  be raised in defence to a suit to set aside  a  summary order would mean that "’The creditor decree-holder would  be in  a  much worse position for his success  in  the  summary claim proceedings than if he had lost in those proceedings". Section  53(1) of the Transfer of Property Act rendered  the transaction voidable at the instance of the creditors if the transfer  was effected with the particular intent  specified and the statute does not prescribe any particular method  of avoidance.  Referring to this the learned judges observed :               "If  the  creditor  knowing  of  the  transfer               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 O.  21,  r.               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 r. 63".               They further pointed out that

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             "the  suit under r. 63 is by the  unsuccessful               party to the claim-petition to establish the                                     80                right which he claims to the property in dis-               pute.      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               transfere  has not the right which he  claims,               namely,   to  hold  the  property  free   from               attachment in execution by the judgments." The  learned  judges based their conclusion on this  and  on several other lines of reasons which we consider unnecessary to set out, but it is sufficient to say that we are enentire agreement with all of them.  There is therefore no substance in  the  point  ;that there is anything in s.  53(1)  as  it originally stood which precluded a defence by an  attaching- creditor to a suit to set aside a summary order under O. 21, r. 63, that the: sale in favour of the plaintiff is vitiated by  fraud of the type specified in the earlier  quoted  pro- vision  and the amendment has admittedly made no  change  in this matter. It was next urged that the third paragraph of the amended s. 53 (1) has, effected a change in the law and that thereafter transfers voidable under 1st paragraph of s. 53 (1) could be avoided only in suits filed by a defeated or delved creditor as plaintiff suing on behalf of himself and other creditors. We  consider  that there is no substance in  this  objection either. We  shall first refer to the purpose of the  amendment.   In decisions  rendered  prior to the amendment,  there  were  a large number in which it was held, following certain English cases decided with reference to-13 Eliz., Ch. 5, on which s. 53(1) was based, 81 that suits by creditors for avoiding a transfer under s.  53 (1)  was  a  representative action.  To  that  general  rule however,  an  exception  was  recognised  in  a  number  of’ decisions  when  the suit was to set aside a  summary  order under O. 21. r. 63, and was brought by an attaching  decree- holder  against whom an adverse order had been made  in  the summary proceedings, it being held that such a suit need not be  in  a representative capacity.  The  decisions  on  this point  were  however not uniform.  It was merely to  have  a uniform  rule and to avoid these conflicting decisions  that the third paragraph was inserted so that after the amendment the  rule that a suit by a creditor should be brought  in  a representative  capacity would apply as much to a  suit  set aside a summary order under O. 21, r. 63, as to other suits. It was not suggested that there was anything in the terms of the amended s. 53 (1) which referred to a defence to a  suit and,  in  fact, learned Counsel did not contend  that  if  a defence  under  s.  53  (1)  could  be  raised  by  defeated attaching-creditor   such   a  defence  had  to  be   in   a representative  capacity,  and  we  consider  that   learned Counsel was correct in this submission.  From a provision as to how a plaintiff, if he filed a suit, should frame it,  we can see no logical process by which it could be held that  a defendant  cannot impugn the validity of the sale  which  is voidable at his instance.  We have, therefore, no hesitation in  rejecting  the  legal  point  urged  on  behalf  of  the

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appellant. The  result is that the appeal fails and is  dismissed  with costs. Appeal dismissed, 82