Patna High Court
Mahendra Mahto vs Suraj Prasad Ojha And Ors. on 29 July, 1957
Equivalent citations: AIR1958PAT568, AIR 1958 PATNA 568
JUDGMENT Kanhaiya Singh, J.
1. These two appeals by the plaintiff arise out of the same suit for redemption. The facts so far as they are necessary for the disposal of these appeals, may be stated as follows. On 17th March, 1927, Ramasray, through his mother and guardian, executed a usufructuary mortgage bond in respect of 3 bighas 3 kathas 2 dhurs of kasht land together with some homestead land for a consideration of Rs. 2400 in favour of Satnarain, husband of defendant 1 and father of defendants 2 to 5. On 16th June, 1942, Ramasray, on becoming major, executed in favour of Satnarain aforesaid another usufructuary mortgage bond in respect of the same property for a consideration of Rs. 2500. Nearly five years later on 6th June 1947 Ramasray sold equity of redemption in respect of half of the mortgaged properly to the plaintiff for Rs. 2500 by a registered sale deed. Out of the consideration, Rs. 1950 were left in deposit for payment to the mortgagee Satnarain and Rs. 500 were paid to the mortgagor Ramasray in cash. It appears that in the meantime one Kamalnarain in a suit for money against Ramasray in a court of Small Causes at Calcutta obtained a decree and after transfer of the decree to Chapra put that decree into execution by attachment and sale of the aforesaid mortgaged 'property along with other properties. The properties were eventually sold at auction on 4th October, 1947 and were purchased by Suraj Prasad Ojha defendant 6 (respondent 1). The latter obtained delivery of possession through court on 2nd February, 1949.
2. The plaintiff offered Rs. 1250 to defendants 1 to 5, the heirs of the original mortgagee Satnarain, and on refusal of the offer by the mortgagee instituted the present suit on 3rd September, 1949 on the ground that as the purchaser of the equity of redemption, though in part, was entitled in law to redeem the mortgages in their entirety.
3. The defendants resisted the suit by two separate written statements one on behalf of the mortgagees (defendants 1 to 5) and the other on behalf of the auction-purchaser (defendant 6) raising similar defences. They denounced the sale deed in favour of the plaintiff as a farzi, fraudulent and fictitious document brought into existence by Ramasrey without consideration for defeating his creditors and contended that, therefore, the plaintiff was not in law entitled to redeem the mortgages. They also pleaded that the mortgages were no longer subsisting but that they had been already redeemed by the auction-purchaser (defendant 6).
3. The learned Munsif held that the safe in favour of the plaintiff was genuine and for consideration, that the mortgages aforesaid had not been validly redeemed and that the plaintiff was, therefore, entitled to redeem them. Against this decree, two appeals were taken to the District Judge - one by defendant 6, being Title appeal 50/2 of 1951/52 and the other by defendants 1 to 5, being title Appeal 64/6 of 1951-52. While the former questioned the correctness of the decision as a whole the latter contested the decree only so far as it related to costs against them.
The learned Subordinate Judge who disposed of the appeals, took a different view altogether. He held that the sale in favour of the plaintiff was fraudulent collusive and farzi and without consideration, and that, therefore, the plaintiff was not entitled to redeem. He further held that the mortgages were not subsisting but that they had been redeemed already by the auction-purchaser, defendant 6, and, therefore, defendants 1 to 5 should not have been saddled with costs.
The learned Subordinate Judge accordingly allowed both the appeals and set aside the judgment and decree of the learned Munsif and dismissed the suit with costs throughout. Now, the plaintiff, has preferred these two second appeals from the decrees in the aforesaid two appeals.
4. The only question canvassed, in these appeals is whether defendant 6, auction-purchaser, was entitled in law to challenge the right of the plaintiff to redeem the usufructuary mortgages, and Mr. A. C. Sinha for the appellant relied upon the provisions of Section 53 of the Transfer of Property Act and contended that even if the findings of the lower appellate Court that the object of the 'sale was to defeat the creditors of Ramasrey and that the plaintiff was not a transferee in good faith be correct, the transaction was not voidable at the instance of auction-purchaser.
He referred to sub-section (2) of Section 53 and contended that the transferee envisaged therein does not include a purchaser at the auction sale. Obviously, this was not a suit by a creditor in a representative capacity on behalf of or for the benefit of all the creditors and therefore, Sub-section(1) of Section 53, it is conceded, was not applicable. Sub-section (2) provides as follows :
"Every transfer of immovable 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."
The contention of Mr. A. C. Sinha is that an auction-purchaser at a court sale is a person who steps in by operation of law and is not a subsequent transferee within the meaning of S. 53. He relied upon a decision of the Bombay High Court in Vasudeo Raghunath v. Janardan Sadashiv, ILR 39 Bom 507: (AIR 1915 Bom 89) (A), in support of his contention.
The contention so far as it goes is no doubt correct. As will appear from the preamble the Transfer of Property Act was intended to define and amend certain parts of the law relating to the transfer of property by act of parties. Section 2 of the Act lays down as follows :
"In the territories to which this Act extends for the time being the enactments specified in the schedule hereto annexed shall be repealed to the extent therein mentioned. But nothing herein contained shall be deemed to affect-
* * * * *
(d) save as provided by Section 57 and Chapter IV of this Act, any transfer by operation of law or by or in execution of a decree or order of a Court of competent jurisdiction......."
Clause (d) of Section 2 read with the preamble makes it clear that the Act does not apply to transfers by operation of law or by or in execution of a decree or order of a Court of competent jurisdiction. The transfers governed by this Act are transfers by "act of parties". It is plain that a purchase at an auction sale is not a transfer as contemplated by the Transfer of Property Act and, is, therefore not validated or invalidated by anything contained in the Act. Accordingly the expression "subsequent transferee" in Sub-section (2) of Section 53 does not include a purchaser at a court sale.
Therefore, the contention of Mr. A.C. Sinha, is no doubt correct. If the case came within the purview of Section 53, there is no doubt that defendant 6 was not entitled in law to impeach the sale in favour of the plaintiff and the plaintiff will be entitled to a judgment in his favour.
5. Mr. Lalnarain Sinha did not dispute the correctness of the contention of Mr. A. C Sinha but contended that the defence of the defendants was not rested on Section 53. He urged that the respondents' defence was not that the sale in favour of the plaintiff had been made with the intent to defeat or delay the creditors of Ramasrey or to defraud a subsequent transferee but that their case was that the sale was a sham and fictitious transaction and there was no real transfer of property at all in the true 'sense of the expression. Mr. A. C. Sinha replied that the contention of Mr. Lalnarain Sinha was not borne out by the findings of the learned Subordinate Judge.
6. In order to appreciate their contention, it will be necessary to examine the findings of the learned Subordinate judge. After a very careful and diligent review of the evidence, the learned Subordinate Judge has observed as follows :
"All these facts, therefore, clearly go to show that the transfer was a fraudulent one made with the intention to defraud the creditors. I am, therefore, satisfied to hold that the sale deed, Ext. 1 is not a genuine document but a fraudulent, collusive and farzi one which was executed without any consideration in name of the plaintiff in order to defeat the claim of the creditors of Ramasrey, the executant. The finding of the Court below to the contrary is, therefore, set aside and I hold that on the basis of this document the plaintiff has acquired no title over the disputed land."
7. Mr. A.C. Sinha urged that the observations of the learned Subordinate Judge that the transfer was a fraudulent one made with the intention to defeat the creditors of Ramasrey clearly indicated that the defendants had impugned the sale under the provisions of section 53 and the learned Subordinate Judge also considered it in that light, although he had not mentioned that section specifically. In my opinion this contention is the outcome of confusion of thought.
The expression used by a Judge in course of a judgment or in his actual findings, however strong may be the words in which they are stated, will not indicate the real nature of the dispute between the parties. In order to determine what in fact the dispute between the parties is one has to look to the pleadings; issues framed in the suit and the evidence adduced. The expressions alone will not have the effect of altering the case made out by the parties in their respective pleadings. In this case the definite defence of the defendants was that the document was a farzi one. No doubt, they also called it collusive and fraudulent.
Nowhere in the pleadings or in the judgments of the Courts below there is any indication that the challenge to the sale in favour of the plaintiff was based upon Section 53. In fact, the learned Subordinate Judge has clearly held that the sale deed (Exhibit 1) is a farzi document executed without any consideration in the name of the plaintiff. No doubt, he has also characterised this document as a fraudulent and collusive and further he has said that the object of the sale was to defeat the claim of Ramasrey.
What actually he meant was that the sale deed was farzi and the motive for execution of such a simulated document was to defeat the creditors of Ramasrey. To that extent the document will be no doubt fraudulent also. The expressions, such as 'fraudulent,' 'collusive' and to defeat the claim of the creditors' do not necessarily imply that the defendants and the learned Subordinate Judge had in their mind the provisions of Section 53.
It is true that a benami transaction is not necessarily a sham or bogus transaction not intended to be operative. Cases occur where a person makes a real transfer in favour of A, but the document is advisedly obtained in the name of X. Here X is a farzidar of A, but nevertheless the transaction was a real one. But the word "benami" is not limited to only transactions of this nature.
It is often used to describe a transaction which is colourable and fictitious and \vhere there is no intention to convey a good title. The Jaw makes a clear distinction between fraudulent transaction and fictitious and farzi or benami transaction. As observed by their Lordships of the Privy Council in the case Petherpermal Chetty v. Muniandy Chetty, ILR 35 Gal 551 (PC) (B) "a benami conveyance is not intended to be an operative instrument.... where a transaction is once made out to be a mere benami it is evident that the benamidar absolutely disappears from the title. His name is simply an alias for that of the person beneficially interested."
In this class of benami transactions there is no real transfer of property and they were not intended to take place at all. In fact both the transferor and the transferee are the one and the same person and notwithstanding the apparent mask of a deed of transfer the transferor retains possession and full dominion over the property. Where the transaction is fraudulent as contemplated by Section 53, the intention is that the transaction was to all intents and purposes real and meant to be operative, but the object of this transfer was to defeat the creditors of the transferor.
8. Section 53 contemplates that there was a transfer in fact though made with the fraudulent intention to defeat the legal rights of subsequent transferees. Where however, the transaction is entirely fictitious and colourable, or in other words whore the transaction is farzi or benami, the provisions of Section 53 do not come into play at all. In almost similar circumstances their Lordships of the Privy Council in Mina Kumari Bibi v. Bijov Singh Dudhuria, ILR 44 Cal 662 at p. 670: (AIR 1916 PC 238 at p. 240) (C), observed as follows :
"Strictly this means that the transaction was benami and not that it was a fraudulent transfer within the meaning of Section 53 of the Transfer of Property Act. The difference is distinct, though it is often slurred."
Section 53 will come into operation only where the document is fraudulent in the sense that though the transfer was real, the object was to defraud the creditors of the transferor. This distinction was recognised even in the case of Basudev (A) (above referred to) relied upon by learned counsel for the appellant. In the case their Lordships of the Bombay High Court observed as follows ;
"It remains to notice the argument of Mr. Rao that apart from Section 53, when it was proved that the plaintiff was not a transferee in good faith, and that he had participated in the fraudulent intentions of the transferor, no Court ought to help the plaintiff. The argument, in order to be effective, must amount to this that the sale deed was not real and that the vendors really continued to be the owners.
I have already dealt with this aspect of the case, and, in my opinion, there is a real and substantial difference between a sham transaction and a transaction which is voidable under Section 53 in consequence of fraud at the instance of the person defrauded."
Section 53 postulates that the impugned transfer was genuine and real but it had been made with the intent to defeat or delay the creditors of the transferor, arid therefore, the provision of Section 53 is inapplicable to a case where the transaction is impugned as farzi or benami, that is to say fictitious and colourable transaction.
9. Mr. A.C. Sinha laid much stress upon the fact that the learned Subordinate Judge had characterized the transaction also as fraudulent. There is in fact no inconsistency between a benami transaction and a fraudulent transaction.
As pointed above, in some benami transaction the transfer effected is real though the document stands in the name of another. But in other class of benami transactions, the transfer is fictitious and colourable. In the latter cases the benami transactions are also fraudulent, because the object of the transferor is to defeat the subsequent transferees of the property. If, therefore, the learned Subordinate Judge calls the sale deed in favour of the plaintiff farzi and fraudulent, it did not mean that he was considering two distinct classes of transaction.
The motive for the transfer, namely, to defeat the creditors of the transferor, as found by the learned Subordinate Judge, will not determine the application of Section 53. In both fraudulent and benami transactions the motive is the same, namely to defeat the persons coming later at the scene. The real question to see is whether the transfer was benami or fraudulent? If it was really benami, then section 53 has no application. If it was fraudulent, then the case will come within the purview of this section.
The case of Sheo Gobind v. Ram Asray Singh, AIR 1939 Pat 5 (D), furnishes complete answer to the contention of Mr. A. C. Sinha. In this case, the decree-holder purchased the property of the judgment-debtor at an auction sale, but after the decree and before the auction-sale the same property had been given to another person in usufructuary mortgage. When the decree-holder sought to obtain delivery of possession he was confronted with the usufructuary mortgage.
Thereupon, the decree-holder brought a suit against the judgment-debtor and his mortgagee to recover possession of the property in question alleging that the usufructuary mortgage was merely a colourable transaction executed by the judgment-debtor, passing neither title nor possession but designed merely to defeat the claim of the decree-holder. It was held in that case that a suit was maintainable. Their Lordships have observed that "there is no rule of law that a plaintiff who has been sought to be defeated by a fraudulent and colourable transfer, which is a sham transaction, is limited to the remedy of section 53. The plaintiff's claim is different; it is based on an allegation that the alienation was collusive and fictitious. If this is established, then the title to the property remained with the transferor and did not pass to the transferee."
On these observations they held that the case did not fall under section 53. It will be observed that in this case also the transaction was characterised as a fraudulent, colourable and sham transaction. In the body of the judgment their Lordships have referred to it as a rarzi transaction. In my opinion, the word 'Farzi and fraudulent' are not altogether incompatible.
The grievance of Mr. A.C. Sinha was that the learned Subordinate Judge should have made a clear distinction between farzi transaction and a fraudulent transaction. In my opinion, the learned Subordinate Judge has clearly kept this fact in view. In fact, no such defence was ever put forward before the Court below, and, therefore, it was not necessary for the learned Subordinate Judge to make a distinction between fraudulent transfer falling under Section 53 and sham and colourable transaction not hit by that section.
The only question which the learned Subordinate Judge was called upon to decide was whether the sale was farzi. For an effective adjudication of that question, it was necessary for him to, decide the cognate question, namely, the motive for the farzi transaction, and the real nature of the transaction, and this is exactly what he has done. If, therefore, while answering categorically that the sale was farzi he also called it fraudulent made with the intent to defraud the creditors of Ram-asrey, it can not be said that he was under a misconception as to the true nature of the defence.
There was only one defence of farzi, and all his observations must be considered as relating to that. It was not open to him to consider a case not put forward by any party. His judgment cannot, therefore, be assailed on that ground. The defence being that of farzi, the provisions of Section 53 are not attracted. I think the contention of the learned Counsel for the appellant is not well-founded and cannot be accepted as correct.
10. It follows that the suit was rightly decided by the learned Subordinate Judge, and there is no merit in these appeals. They are accordingly dis missed with costs.