Andhra Pradesh High Court - Amravati
Patnayakuni Kodanram vs Kolati Dhanalakshmi on 24 December, 2020
Author: M.Satyanarayana Murthy
Bench: M.Satyanarayana Murthy
HIGH COURT OF ANDHRA PRADESH :: AMARAVATI
****
CIVIL REVISION PETITION No.1678 OF 2014
Between:
Patnayakuni Kodandaram
... Petitioner
And
Kolati Dhanalakshmi and 2 others.
... Respondents.
JUDGMENT PRONOUNCED ON 24.12.2020
THE HON'BLE SRI JUSTICE M.SATYANARAYANA MURTHY
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? - No -
2. Whether the copies of judgment may be
marked to Law Reporters/Journals - Yes -
3. Whether Their Ladyship/Lordship wish to
see the fair copy of the Judgment? - Yes -
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* THE HON'BLE SRI JUSTICE M.SATYANARAYANA MURTHY
+ CIVIL REVISION PETITION No.1678 of 2014
% 24.12.2020
# Patnayakuni Kodandaram.
....Petitioner
v.
$ Kolati Dhanalakshmi and 2 others
.... Respondents
! Counsel for the Petitioner : Sri A.S.C.Bose
Counsel for Respondents: Sri B.V.Rama Rao
<Gist :
>Head Note:
? Cases referred:
1.AIR 1965 AP 68
2.(1903) 27 Bom. 146
3.AIR 1923 Lah 478
4.AIR 1927 Mad 657
5.I.L.R. 10 Mad., 213
6.AIR 1948 Bom. 265
7.AIR 1954 Nag 129
8.(1935) 62 C.L.J. 548
9.AIR 1963 Ker 356
10. (1938) 40 BOMLR 371
11. AIR 1940 Mad 789
12. AIR 1962 MP 363
13. (1934) I.L.R. 12
14. AIR 1963 SC 1150
15. 2017 (2) KLJ 706
16. AIR 1967 Raj 283
`
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17. AIR 1958 Orissa 58
18. AIR 1934 Rang 200
19. ILR 2015 KARNATAKA 3128
20. 1990 (3) SCC 291
21. 1985 (1) An.WR 481
22. AIR 2002 Chh 7
23. AIR 2005 Gau 54
24. AIR 1972 Ker 269
`
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THE HON'BLE SRI JUSTICE M.SATYANARAYANA MURTHY
CIVIL REVISION PETITION No.1678 of 2014
ORDER:
The civil revision petition is filed under Article 227 of the Constitution of India, challenging the order dated 18.03.2014 passed in I.A.No.310 of 2012 in O.S.No.252 of 2012 by the III Additional Senior Civil Judge, Kakinada, whereby the petition filed under Order I Rule 8 of Code of Civil Procedure (for short "C.P.C.") to sue in representative capacity i.e. representing General Body of Creditors against the respondents, was dismissed.
The petitioner filed suit O.S.No.252 of 2012 to declare the alienations made by respondent No.1 in favour of respondent Nos.2 and 3 by registered sale deed dated 12.05.2011 is void and not binding on the plaintiff as well as other creditors of respondent No.1 as it is fictitious, nominal, sham and devoid of lawful consideration. In the alternative, to declare that the alienations made by respondent No.1 in favour of respondent Nos.2 and 3, described in the schedule attached to the plaint are not binding on the plaintiff and other creditors of respondent No.1 as it is made with an intent to defeat the lawful creditors of respondent No.1 including the petitioner/plaintiff.
The petitioner/plaintiff is claiming to be the creditor of respondent No.1 as respondent No.1 borrowed Rs.5,00,000/- from the petitioner/plaintiff on 13.05.2009 for his family expenses and to discharge sundry debts, executed promissory note agreeing to repay the same with interest at the rate of 24%, and also agreed to pay the same either to the plaintiff or to his order as and when demanded. As respondent No.1 failed to repay the debt due under the ` MSM,J crp_1678_ 2014 5 promissory note, the petitioner/plaintiff filed O.S.No.756 of 2011 on the file of the Principal Senior Civil Judge, Kakinada for recovery of the amount due under the promissory note, and also filed interlocutory application for attachment of property before judgment and the Principal Senior Civil Judge ordered attachment before judgment under Order XXXVIII Rule 5 of C.P.C.
While the matter stood thus, respondent No.1 and respondent Nos.2 and 3 who are henchmen of respondent No.1 entered into transaction of sale as respondent No.1 sold the schedule property to respondent Nos.2 and 3 for Rs.12,77,500/- on 12.05.2011, but the said sale is fictitious, nominal and fraudulent. Therefore, to avoid such fraudulent transfer, suit is filed claiming relief under Section 53 of the Transfer of Property Act (for short "T.P.Act"), sought relief stated supra.
It is specifically contended that respondent No.1 borrowed amount from different persons, who are creditors of respondent No.1, but to avoid legitimate debt due by respondent No.1, a sale transaction was entered into by respondent No.1 with respondent Nos.2 and 3. Hence, the petitioner filed suit representing the general body of creditors. Along with the suit, the petitioner filed I.A.No.310 of 2012 under Order 1 Rule 8 seeking leave of the Court to represent the general body of creditors.
The suit is being contested and the respondent Nos.2 and 3 filed their independent written statements.
Respondent No.2 filed counter denying all the material allegations made in the petition interalia contending that respondent No.1 never borrowed Rs.2,50,000/-, executed any promissory note ` MSM,J crp_1678_ 2014 6 much less promissory note dated 26.05.2009 agreeing to repay the same with interest at the rate of 24% either to the petitioner or on his order as and when demanded and respondent No.1 had no necessity to borrow any amount from the petitioner.
It is specifically contended that there are disputes between Olupudi Gova Raju and respondent No.1 regarding chit transaction and in the course of disputes he got filed the petition through the petitioner by fabricating the alleged promissory note by forging the signature and thumb impression of respondent No.1.
It is further contended that the henchmen of the petitioner also filed other suits i.e. O.S.No.819 of 2011 on the file of I Additional Senior Civil Judge's Court, Kakinada and O.S.No.657 of 2011 on the file of the Principal Senior Civil Judge's Court, Rajahmundry, and they are pending.
It is further contended that respondent No.1 filed I.P.No.10 of 2011 on the file of Principal Senior Civil Judge' Court, Rajahmundry. The petitioner and his henchmen Olupudi Gova Raju bore grudge against the respondents, colluded with each other, and got filed the present petition along with the suit, and that the transaction is not genuine and that there is absolutely no iota of evidence to substantiate the case of the petitioner.
The specific contention of the respondents is that the petitioner is not entitled to seek relief in the petition to sue in representative capacity representing general body of creditors. The petitioner also approached the Court with unclean hands, with false, fictitious allegations and that there are no bonafides on the part of the petitioner, requested to dismiss the petition. ` MSM,J crp_1678_ 2014 7 Upon hearing argument of both the counsel, the Court below dismissed the petition filed under Order I Rule 8 of C.P.C.
Aggrieved by the same, the present revision is filed under Article 227 of the Constitution of India raising a specific contention that the petition under Order 1 Rule 10 of C.P.C. is mandatory to represent the general body of creditors, but the trial Court did not consider the relevant provisions of the Transfer of Property Act and C.P.C., which laid down the procedure for filing representative suit obtaining leave under Order 1 Rule 8 of C.P.C., thereby committed error, requested to set aside the impugned order.
Sri A.S.C.Bose, learned counsel for the petitioner, contended that when the plaint is registered as suit filed by the petitioner, it amounts to granting permission to sue in representative capacity i.e. representing general body of creditors, but dismissal of application during pendency of the suit is a serious illegality, more particularly on technical grounds. Therefore, the order under challenge is illegal. It is further contended that the allegations made in the counter filed by respondent No.1 are sufficient to conclude that there are two other suits, pending against respondent No.1 and that the petitioner intend to represent the other creditors, which constitutes general body of creditors, thereby the petitioner is entitled to claim relief under Order 1 Rule 8 of C.P.C., but the trial Court erroneously dismissed the petition, requested to set aside the order under challenge.
Learned counsel for the respondents supported the order under challenge while submitting that the trial of the suit is almost at the fag end, hence granting permission to the petitioner at this ` MSM,J crp_1678_ 2014 8 stage would not serve any purpose, requested to dismiss the revision.
Considering rival contentions, perusing the material available on record, the point that arises for consideration is:
Whether the petitioner, being one of the creditors, is entitled to represent the general body of creditors to avoid alleged fraudulent transfer i.e. sale deed dated 12.05.2011 executed in favour of respondent Nos.2 and 3 by respondent No.1, invoking Order 1 Rule 8 of C.P.C.?
P O I N T:
Undisputedly, the petitioner filed suit O.S.No.756 of 2011 pending on the file of the Principal Senior Civil Judge's Court, Kakinada for recovery of amount. He also filed interlocutory application under Order XXXVIII Rule 5 of C.P.C. for ordering attachment before judgment and succeeded in obtaining interim order in a petition filed under Order XXXVIII Rule 5 of C.P.C.
It is not known whether the suit O.S.No.756 of 2011 on the file of Principal Senior Civil Judge's Court, Kakinada was disposed of or not? At the same time, the petitioner made an allegation in the affidavit that respondent No.1 borrowed amount from various creditors, but did not disclose the details of other creditors either in the petition or in the plaint except making bald allegations that there are creditors, and that the sale transaction was entered into by respondent No.1 in favour of respondent Nos.2 and 3 to avoid payment of debt to the general body of creditors. When the petitioner intended to represent general body of creditors, he has to disclose the details of general body of creditors, if the general body of creditors is ascertainable. However, in the counter filed by respondent No.2, for one reason or the other, he admitted that two ` MSM,J crp_1678_ 2014 9 suits i.e. O.S.No.819 of 2011 on the file of the I Additional Senior Civil Judge's Court, Kakinada and O.S.No.657 of 2011 on the file of the Principal Senior Civil Judge's Court, Rajahmundry were filed for recovery of amount on the basis of alleged promissory notes and they are pending for adjudication before the Court. This admission in paragraph No.5 of the counter filed by respondent No.2 is suffice to show that there are two other creditors, who filed suits and they are pending adjudication before two different competent Courts. Thus, all the three plaintiffs in O.S.No.756 of 2011 on the file of the Principal Senior Civil Judge's Court, Kakinada, O.S.No.819 of 2011 on the file of the I Additional Senior Civil Judge's Court, Kakinada and O.S.No.657 of 2011 on the file of the Principal Senior Civil Judge's Court, Rajahmundry constitutes as general body of creditors. Therefore, one creditor can represent the general body of creditors, but for one reason or the other, the petitioner/plaintiff did not disclose the details of general body of creditors to represent them and filed suit in representative capacity invoking Order I Rule 8 of C.P.C. No such objection was raised by the respondents in the entire counter and the order is also silent as to the compliance of the mandatory requirements.
Section 53 of the Transfer of Property Act is relevant for the purpose of deciding the real controversy in this matter, which is extracted hereunder for better appreciation.
Section 53. Fraudulent transfer.--
(1) Every transfer of immoveable 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.
Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.
Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.
` MSM,J crp_1678_ 2014 10 A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for 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.
(2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.
For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made. Therefore, a bare reading of Section 53 of the Transfer of Property Act, it permits filing of suit by any one of the creditors representing general body of creditors.
Clause (1) of Section 53 of the T.P.Act deals with transfer of immovable property made with intent to defeat or delay the creditors of the transferor. Clause (2) of Section 53 of the T.P.Act deals exclusively with the transfer made without consideration with intent to defraud a subsequent transferee.
The first para of the Section 53 of the T.P.Act enacts that if the intent to defeat or delay is established, the transfer is voidable at the option of the creditor so defeated or delayed. The second para of Section 53 of the T.P.Act postulates the existence of both good faith and consideration as sufficient to take the case out of the operation of the rule in the first para. But mere payment of consideration, even if it be adequate does not protect the purchaser if he has been a party to the fraud.
To make sub-section (1) more comprehensive it has been provided in para 3 that nothing contained in sub-section (1) shall affect the law of insolvency for the time being in force. ` MSM,J crp_1678_ 2014 11 The fourth para of sub-section (1) provides that a suit contemplated in para.1 of the sub-section should be brought for benefit of all the creditors.
Para (1) of sub-section (2) provides that a transfer without consideration with intent to defraud a. subsequent transferee shall be voidable at the option of such transferee, and para. (2) of sub- section (2) provides that a voluntary conveyance if made bona fide and without fraudulent intent shall not be deemed to be fraudulent by reason of any subsequent purchase for value.
Thus, on close analysis of Section 53 of the T.P.Act, suit has to be filed on behalf of general body of creditors by anyone of the creditors or for the benefit of general body of creditors.
The term "creditor" includes a decree-holder. It also includes both secured and unsecured creditors. Section 53 of the T.P.Act applies even when the debtor intends to defeat a single creditor. [Vide: Bhaskara Chalamiah v The Body of Creditors of Piler Khasim Saheb 1].
But it is not necessary that the debt should be merged in a decree. [Vide: Timappa v Venkappa2, Chinamal v Gul Ahmad3; Meenakshi v Ammini4] The effect of the declaration under Section 53 of the Transfer of Property Act is that the transaction does not affect the creditors' right to recover their claims from the property transferred. The declaration would still leave the deed operative between the parties thereto and would not amount to cancelling or setting aside the deed because the creditors have no title or interest in the property to set 1 AIR 1965 AP 68 2 (1903) 27 Bom. 146 3 AIR 1923 Lah 478 4 AIR 1927 Mad 657 ` MSM,J crp_1678_ 2014 12 aside the deed as between the parties. [Vide: Pachamuthu v Chinnappan5, Abdallakhan Daryakhan v Purshottam Damodar6, Rambilas Sitaram v. Ganpatrao Pandharinath 7].
Coming to the frame of the suit, para 4 of sub-section (1) lays down that the suit should be brought on behalf of or for the benefit of all the creditors. Para 4 has been added in 1929. Before the addition of this para, there was conflict of opinion whether a suit to set aside a transfer on the ground that it was made with intent to defeat or delay creditors should be brought on behalf of all the creditors or whether it was competent to any one creditor to institute such a suit. The amendment gives statutory recognition to the practice followed by the Calcutta and Bombay High Courts as being "based on the wholesome principle that the transferee should not be exposed to a multiplicity of suits at the instance, of various creditors." (See: Ekkari Ghose v. Sidheswar Ghose8, Velama v R. Shenoy9).
On the other hand, it has been held in some cases that a defeated decree-holder is not affected by Section 53 and is not bound to sue successful claimant in a representative suit but can institute a suit under Order XXI, Rule 63 of C.P.C. [Vide: Shrimal Kasturchand Marwadi vs Hiralal Hansraj Marwadi10) The suit being for the benefit of all creditors, every creditor is entitled to take the benefit of any decree passed in favour of the creditor bringing the suit, and for the same reason, if the creditor's suit is dismissed that decree of dismissal ought to bind all creditors. 5 I.L.R. 10 Mad., 213 6 AIR 1948 Bom. 265 7 AIR 1954 Nag 129 8 (1935) 62 C.L.J. 548 9 AIR 1963 Ker 356 10 (1938) 40 BOMLR 371 ` MSM,J crp_1678_ 2014 13 The creditor's suit being in a representative capacity the provisions of Order I, Rule 8 of C.P.C. should be complied with. [Vide: Ekkari v Sidheswar (referred supra), Madina Bibi v. Ismail Durga Association 11, Shantilal Bardichand Mahajan vs Champalal Radhaji 12).
Where a suit is brought by a creditor not in a representative capacity but the defendant elects to go to trial without alleging in the written statement that the suit as framed is not maintainable, he is not allowed subsequently to contend in appeal that the suit is not maintainable. If the objection goes to the root of the matter, the appellant should be permitted to raise the objection even in appeal although the Court might allow the plaintiff to suitably amend the plaint. (Vide: Maung Tun Thein v. Maung Sin 13].
Thus, in effect, suit must be in a representative capacity, however, it could also be maintained by single creditor. When it was brought by single creditor and parties went on trial without raising objection, certainly, it debars to raise any such contention at subsequent stage.
After the amendment a transfer voidable under Section 53(1) of the T.P.Act can be avoided by a creditor impugning the transfer on behalf of himself and the other creditors. And the rule that a suit by a creditor should be brought in representative capacity would apply as much to a suit to set aside a summary order under Order XXI Rule 63 of C.P.C. as to other suits. [Vide: C. Abdul Shukoor Saheb v Arji Papa Rao 14).
11 AIR 1940 Mad 789 12 AIR 1962 MP 363 13 (1934) I.L.R. 12 14 AIR 1963 SC 1150 ` MSM,J crp_1678_ 2014 14 On analysis of law laid down by various Courts after amendment to Section 53 of C.P.C. in 1923, a suit can be filed by one creditor representing general body of creditors. Therefore, the petitioner approached the Court invoking Order I Rule 8 of C.P.C. and filed a suit in representative capacity without disclosing details of general body of creditors. However, respondent No.1 herself disclosed the details of other creditors, who filed suit as discussed in earlier paragraphs.
In one of the judgments of Kerala High Court in "Laila v. Soosamma Chacko15", learned single Judge of the High Court while considering the application filed under Order VI Rule 17 of C.P.C. seeking leave of the Court to amend the plaint converting regular suit into representative suit, the Court observed that the 4th part of Section 53(1) of the T.P. Act is clear that a suit under Section 53 of the T.P. Act shall be instituted on behalf of, or for the benefit of, all the creditors. The suit in the above judgment was instituted by the plaintiff in her personal capacity. It is not a suit either filed in a representative capacity or on behalf of some other persons. In order to bring a suit under Section 53 of the T.P. Act, the plaintiff must show, aver and plead that the suit was instituted for himself/herself and also for and on behalf of all the creditors. It should be a representative suit for the benefit of general body of creditors. In a representative suit leave of the court has to be obtained by complying with the requirement under Order I Rule 8 of the C.P.C. In other words, when a suit under Section 53 of the T.P. Act is filed (other than a claim under Rule 58 of Order XXI of the C.P.C.) it must be for and on behalf of the creditors and it is the duty of the plaintiff to comply with the requirement under Order I Rule 8 of the C.P.C. so 15 2017 (2) KLJ 706 ` MSM,J crp_1678_ 2014 15 as to enable all the creditors to join as a party to the suit. It is not at all necessary that the plaintiff should know about the details of all the creditors or whether any other creditor is available or not while instituting such a suit. But the mandate under Order I Rule 8 of the C.P.C. has to be complied with.
In "Ganesh Mal v. Meghraj16" the Rajasthan High Court observed that when a suit is filed under Section 53 of the T.P.Act, provisions of Order 1 Rule 8 C.P.C., must have been complied with and then went on to hold that he would have dismissed the suit but for an application for amendment by the plaintiffs which had been moved before him. However, in paragraph No.12 of the judgment, the Court observed that a good deal of the complications that have arisen In this case have, however, been caused because the learned Judge when the appeal in the case was first taken to him held that this was a suit under Section 53 of the Transfer of Property Act and not under Order 21 Rule 63 C. P C. Curiously enough, when the case came before the same learned Judge in appeal for the second time and he gave the judgment which !s the subject-matter of this appeal, he felt persuaded to say that it was not necessary for the plaintiffs being the sole creditors of the defendant judgment-debtor to have brought the suit under Section 53 of the T.P. Act and resorted to the provisions of Order 1 Rule 8 C. P. C. The learned Single Judge of the Rajasthan High Court finally concluded that Section 53 of the T.P.Act is an enabling provision which confers a right or privilege on a decree-holder to impeach a transaction of his debtor in the interest of other creditors as well but it cannot be so interpreted as to preclude a single creditor from establishing his own right, if he chooses to do so or compel him to 16 AIR 1967 Raj 283 ` MSM,J crp_1678_ 2014 16 bring a representative suit thereunder. Indeed, such a suit can certainly be brought within the meaning of Order 21 Rule 63 of C.P.C. even if there is a single creditor and he has levied execution and has failed to successfully reach the property of the judgment- debtor in execution of his decree. Such a suit if brought need not be representative at all, for what the plaintiff really seeks in a suit of this nature is to avoid the fraudulent transaction which is set up against him as defeating his own right and not the general right of the creditors as a whole. Reference was also made in support of the issue to "Radhanath v. Madhusudan17" "U.Maung Nge v. P. L. S. P. Chettiar Firm18".
Thus, the Court drawn distinction between the suit filed by the learned Single creditor, who levied execution proceedings for realisation of decree debt and suit filed under Section 53 of the T.P. Act. If the single creditor wants to annul the fraudulent sale, the remedy is only to file a suit under Order XXI Rule 63 of C.P.C. But if one creditor intended to represent the general body of creditors and filed a suit to annul the fraudulent transaction, he must initiate suit under Section 53 of the T.P.Act strictly complying with mandatory requirement under Order 1 Rule 8 of C.P.C.
In "S.K.Gangadhara v. Ramachandra19", learned single Judge of the Karnataka High Court again drawn the distinction between suit filed under Order XXI Rule 63 of C.P.C. and suit filed under Section 53 of the T.P.Act while referring to Section 64 of C.P.C. When a creditor attached the property and the same was alienated by the debtor, it is hit by Section 64 of C.P.C. 17 AIR 1958 Orissa 58 18 AIR 1934 Rang 200 19 ILR 2015 KARNATAKA 3128 ` MSM,J crp_1678_ 2014 17 The provision as contained in Section 64 of CPC reads as hereunder:
"64. Private alienation of property after attachment to be void.-
(1) Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment debtor of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.
(2) Nothing in this section shall apply to any private transfer or delivery of the property attached or of any interest therein, made in pursuance of any contract for such transfer or delivery entered into and registered before the attachment."
Sub-section (2) to Section 64 noticed above would indicate that what is of importance is as to whether the sale was pursuant to the contract which was entered prior to the order of attachment. In the facts of the above judgment, there is no dispute to the fact that the order of attachment was passed on 02.07.2004 while the registered agreement of sale was entered into on 01.07.2004. Such position was considered by the Supreme Court in the case of "Vannarakkal Kallalathil Sreedharan. V. Chandramaath Balakrishnan20", wherein it is held that though Section 64 of CPC was intended to protect the attaching creditor, but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation arising therefrom must be allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be allowed to override the contractual obligation from an antecedent agreement for sale of the attached property. The attaching creditor cannot ignore that obligation and proceed to bring the property to sale as if it remained the absolute property of the judgment debtor. 20
1990 (3) SCC 291 ` MSM,J crp_1678_ 2014 18 If any creditor intended to void fraudulent transaction, he has to file a suit invoking provisions of Order 1 Rule 8 of C.P.C. i.e. representative suit representing the general body of creditors. A perusal of Section 53 of the T.P.Act indicate that by the said provision, a right has been created in favour of a creditor to secure any fraudulent transfer of immovable property to be avoided as not binding. From the provision, it is clear that every transfer made by a debtor is not void-ab-initio, but it is only voidable on a suit being instituted by the creditors and if it is established that such transfer of immovable property is made to defeat or delay the creditors. Until such suit is instituted by the creditors and the transfer is avoided by securing it to be declared as not binding, the transfer will remain valid in law even as against the creditors. Hence, the option available to the creditors could be exercised in the circumstances stated therein, while the transferee can sustain the transfer by showing that the same is in good faith and for consideration.
In the said judgment, the Court also drawn distinction between the suit filed under Order XXI Rule 63 of C.P.C. and the suit filed under Section 53 of the T.P.Act while relying on the judgment of the Apex Court in "C. Abdul Shukoor Saheb v Arji Papa Rao"
(referred supra), wherein it is held as follows:
"(29) 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 entire 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 provision and the amendment has admittedly made no change in this matter. (30) 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 ` MSM,J crp_1678_ 2014 19 delved creditor as plaintiff suing on behalf of himself and other creditors. We consider that there is no substance in this objection either. (31) 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, 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 appellant."
(emphasis supplied) Finally, the Karnataka High Court held that the protection to a creditor under Section 53 of T.P. Act is applicable as rule of justice, equity and good conscience and to seek such benefit one should also approach the Court with clean hands and good conscience. However, having noticed the manner in which the decree holder sought to put forth a make believe case about notifying the transferee about the pendency of the suit and attachment so as to contend that the transfer is not in good faith would disentitle the benefit to the decree holder in the present circumstance. The analysis of the Courts below to come to the conclusion that the notice had been served and as such the transfer is bad is also not justified. ` MSM,J crp_1678_ 2014 20 Thus, in view of fine distinction drawn between the suit filed under Order XXI Rule 63 of C.P.C. and Section 53 of the T.P.Act and held that the suit under Section 53 of the T.P.Act must be representative suit following the mandatory procedure under Order 1 Rule 8 of C.P.C. For filing suit under Order XXI Rule 63 of C.P.C., under Order I Rule 8 of C.P.C. is not required to be complied with.
Coming to Order 1 Rule 8 of C.P.C. one person may sue or defend on behalf of all in same interest, where there are numerous persons having the same interest in one suit,- one or more of such persons may, with the permission of the Court, sue or be sued, or may defend such suit, on behalf of, or for the benefit of, all persons so interested; the Court may direct that one or more of such persons may sue or be sued, or may defend such suit, on behalf of, or for the benefit of, all persons so interested.
The object of Order 1 Rule 8 of C.P.C. is to avoid bringing all the body or persons who have got community of interest and the persons who are serving to come on record should have an interest in the matter and as postulated in the explanation they need not have the same cause of action as other persons. The predominant object is the community of interest and to safeguard the interest of the body of persons for whose benefit the lis is being fought for. When the object under Order I Rule 8 of C.P.C. is to avoid multiplicity and bringing numerous persons having the same interest in the suit on record, there should be an apprehension on the part of those seeking to come on record that their interest may not adequately be represented by the persons representing them are acting or likely to act prejudicial to their interest. But it all depends on facts and circumstances of each case. It cannot be put in a ` MSM,J crp_1678_ 2014 21 straight jacket. (Vide: Sri Ram Housing Society v. Hanuma Sastry21") Thus, the main object is to avoid bringing multiple persons as parties before the Court.
Order 1 Rule 8 provides that where there are numerous persons having the same interest in one suit, one or more or such persons may with the permission of the Court sue on behalf of or for the benefit of all persons so interested. Here in a suit which is ordinarily known as a representative suit the plaintiff is required to make an application under Order 1 Rule 8, CPC. An application submitted under Order 1 Rule 8, CPC cannot be granted straight away but a notice of such application is to be published by the Court in the daily newspaper having circulation in the said locality at the expenses of the plaintiff. The people interested in the suit or opposing the suit may come and join the proceedings. If the permission is not granted by the Court then the Court is obliged to reject the application and dismiss the suit. (Vide: "Bhupendra Singh Babara v. Municipal Council, Ambikapur22") Order 1 Rule 8 of C.P.C. will apply only if
(i) the parties are numerous, (ii) they have the same interest, (iii) the necessary permission of the Court is obtained or direction under Clause (b) of Sub-rule (1) is given and (iv) notice under Sub-rule (2) is given. One of the conditions for invoking Order 1, Rule 8 is that the applicant must have the same interest with those persons sought to be represented by him but it is not necessary that the cause of action 21 1985 (1) An.WR 481 22 AIR 2002 Chh 7 ` MSM,J crp_1678_ 2014 22 must be the same. Mulla in his class Commentary on CPC (15th edn.) has succinctly explained at page 987 : -
"In order that Order 1, Rule 8 may be invoked, it is not necessary that the cause of action must be the same. What it required is 'Same interest' i.e.,
(i) common interest or
(ii) Common grievance." (Vide: Nakuleswar Paul v. State of Tripura23") In case, the petitioner satisfied the conditions as stated above, approached the Court, seeking leave of the court, the Court owes a duty to those who are not on the party array but are still considered as represented in the suit to see that they are not prejudiced. In considering any application that may come up before Court seeking permission to represent parties under Order 1 Rule 8, the courts have to keep this in view. The Court must insist upon parties furnishing the addresses of persons when their addresses are ascertainable and when the number is such that personal service would not be impracticable, the Court must necessarily direct such personal service on parties besides publication. Who are sought to be represented and whether they are persons whose addresses are ascertainable is a matter which the Court must be told. The party who seeks such representation under Order 1 Rule 8 of C.P.C. must necessarily furnish addresses of such persons. Since the consequence of a decision reached with parties represented under Order I Rule 8 is one of debarring them from raising the question over again, Courts have necessarily to consider the requirements 23 AIR 2005 Gau 54 ` MSM,J crp_1678_ 2014 23 under Order I Rule 8 of C.P.C. not as mere formalities or matters of form (Vide: "Narayani Kamalakshi v. Kunchiyan Bahulayan24") It is clear from the analysis of Order I Rule 8 of C.P.C., the petitioner who sought leave invoking Order I Rule 8 of C.P.C., must furnish the details including addresses of the persons, whom he is representing and if the Court finds that it is practicable to serve notice on them, the Court while ordering publication, order notice by personal service also. But, in the present facts, the petitioner did not furnish the details of general body of creditors and no details were furnished including the values of claim of the creditors. However, respondent No.2 admitted about the details of two creditors, who filed suits based on promissory notes.
Turning to the facts of the present case, the trial Court dismissed the petition on a different ground that the petitioner did not satisfy the requirements under Order I Rule 8 of C.P.C. referring the requisites for grant of permission in the order, erroneously concluded that the other creditors, on whose behalf the petitioner is seeking relief are not parties to the suit. Therefore, relying on the settled principle "a person who is not a party to a proceeding may have properly been made a party to the proceeding or if he is bound by such proceeding being deemed to be a party to it", dismissed the petition.
The finding of the Court below at paragraph Nos.7 and 8 exfacie erroneous for the reason that the petitioner sought leave of the Court to sue on behalf or for the benefit of general body of creditors. When the petitioner sought leave to represent the other creditors or general body of creditors, they need not be joined as parties to the suit, thereby the finding of the Court below is vitiated 24 AIR 1972 Ker 269 ` MSM,J crp_1678_ 2014 24 by illegality. It is evident that the Court below did not order publication of general notice inviting objections from the public for grant of permission to the petitioner to sue in the representative capacity for the benefit or on behalf of general body of creditors, but arrived at premature conclusion, which is illegal on the face of it. Therefore, the impugned order passed by the Court below is liable to be set aside. Accordingly, the point is answered.
In the result, the civil revision petition is allowed setting aside the order dated 18.03.2014 passed in I.A.No.310 of 2012 in O.S.No.252 of 2012 by the III Additional Senior Civil Judge, Kakinada and I.A.No.310 of 2012 in O.S.No.252 of 2012 is remanded to the Court below to decide afresh following the mandatory procedure prescribed under Order 1 Rule 8 of C.P.C. i.e. issue notice by way of publication calling objections from the public and details of creditors based on the information available on record either in the plaint or in the affidavit filed along with the petition or based on the information furnished by respondents; if notice can be served personally on the general body of creditors or numerous persons on whose behalf, the petitioner intend to sue in representative capacity, order notice and decide the petition in accordance with law laid down by various Courts in the judgments (referred supra) within two (2) months from the date of receipt of a copy of this Order. No costs.
The miscellaneous petitions pending, if any, shall also stand closed.
_________________________________________ JUSTICE M. SATYANARAYANA MURTHY 24.12.2020 Note:
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