Madras High Court
V.P.S.Viswanathan vs Sri Raja Yarns Traders on 26 October, 2009
Author: S.Palanivelu
Bench: S.Palanivelu
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.10.2009 CORAM: THE HONOURABLE MR.JUSTICE S.PALANIVELU C.R.P.(NPD) No.93 of 2009 and M.P.No. 1 of 2009 V.P.S.Viswanathan ... Petitioner Vs. Sri Raja Yarns Traders, A Partnership Firm Rep. by its Partner R.Rajasekaran, S/o.Ramasamy Mudaliar, 157, Eswaran Kovil Street, Erode District. ... Respondent Prayer: Civil Revision Petition filed under Section 115 of Code of Civil Procedure against the fair and decretal order dated 21.07.2008, made in R.E.P.No.40 of 2006 in O.S.No.556 of 2001, on the file of the District Munsif Court, Thiruchengode. For Petitioner : Mr.N.Manoharan For Respondent : Mr.S.Natarajan * * * O R D E R
The petitioner is the judgment-debtor in R.E.P. No.40/2006 in O.S.No.556 of 2001, on the file of the Subordinate Court, Erode, now pending for execution in District Munsif Court, Thiruchengode. The respondent has filed an Execution Petition for attachment and sale of the immovable property belonging to the judgment-debtor under Order 21, Rule 11(2) CPC.
2. The following is the allegations in terse contained in the counter filed by this petitioner:
2.1. This respondent has no means to pay off the decree debt. On 07.10.1988, he mortgaged the E.P. mentioned property in favour of Komarapalayam J.K.K. Nataraja Nagar Cooperative Building Society for Rs.2,10,000/-. Since the loan was not discharged as on 30.11.2005, a final notice was issued to him stating that in default of payment of Rs.5,10,194/-, the property would be brought for auction.
2.2. This respondent is suffering from blood-pressure and is taking treatment. He also incurred loss in his business and is maintaining his family with hardships. In this situation, the said society issued final notice for sale, hence, he approached the society. One Thandavan intended to bid the auction and he has also approached the society. The officials of the society suggested this respondent to sell the property to discharge the loan and the balance may be taken by him, otherwise the property would be sold in auction. Hence, pressurised by the circumstances, he sold the property on 30.11.2005 for Rs.4,25,000/- to Thandavan and discharged the entire society loan. On the date of filing of the Execution Petition, the property did not belong to this respondent. Hence, the petition may be dismissed.
3. The learned District Munsif, Thriuchengode, turning down the contentions of this petitioner, ordered attachment of the property. Aggrieved as against the said order, the petitioner is before this Court.
4. The Executing Court has carefully scrutinised the oral evidence on record and recorded finding that it is incorrect to state that on 30.11.2005 the property was sold to Thandavan but, the sale was effected only on 05.12.2005, as per the evidence of the judgment debtor and that even prior to the said sale, on 17.11.2005, the loan was discharged as evident from Ex.R5, the discharge receipt issued by the society. It has also observed that even though the judgment-debtor knew fully well that he had obligations to satisfy the decree debt in favour of the decree holder, his attitude in executing sale in favour of Thandavan is not in accordance with law. It has also raised doubt that the purchaser Thandavan, being a milk-vendor, who is selling about 40 litres of milk every day earning a sum of Rs.500/- per day was able to pay Rs.4,25,000/- on a single occasion, without there being any agreement for sale and this transaction would indicate that in order to defraud the creditor the judgment-debtor has sold the property.
5. The learned counsel Mr.N.Manoharan, appearing for the petitioner, would contend that inasmuch as the sale was effected by this petitioner much earlier to the filing of the Execution Petition that on the date of filing of Execution Petition this judgment-debtor was not the owner of the property, that none of the ingredients in Section 53 of the Transfer of Property Act, would be applicable to the present case and that by means of oral evidence adduced on his behalf, the bona fide intention of the petitioner could be ascertained.
6. Arguing on the other side of the coin, the learned counsel Mr.S.Natarajan, appearing for the respondent, would state that when the judgment-debtor was bound to pay off the decree amount to this respondent, in the guise of paying off the loan amount to the society, he has fraudulently executed the sale deed, which transaction is hit by Section 53 of the Transfer of Property Act and that the Executing Court has followed the decisions of this Court and there is no need to interfere with the order challenged before this Court.
7. In order to have thorough glimpse of the matter in issue, it is advantageous to extract Section 53 of the Transfer of Property Act which reads as follows:
"53. Fraudulent transfer.- (1) Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.
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.
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 transfer or shall be instituted on behalf of, or for the benefit of, all the creditors.
(2) Every transfer of immovable property made without consideration with intend to defraud a subsequent transferee shall be voidable at the option of such transferee.
For the purpose 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."
8. In order to make Section 53 applicable, it should be shown that the judgment-debtor, with an intention to defeat or delay the claim of the creditor, transferred the property. If the purchaser wants to get insulation from the claim of the creditor, he has to show that he purchased the property in good faith and for valuable consideration.
9. In the light of the above said provision, it is to be seen whether the transaction was effected by the judgment-debtor with an intention to defraud the respondent and whether it was supported by consideration and done with good faith.
10. As found by the Executing Court, there is lack of evidence as to how Thandavan was able to gather Rs.4,25,000/- to make payment on a single day. This Court has been consistently holding that there is no need for the creditor to file a separate suit to decide that the transfer by the judgment-debtor is fraudulent transaction but filing Execution Petition, taking steps for attachment and sale of the property, would indicate that he exercised his option as required under Section 53 of the Transfer of Property Act.
11. The learned counsel appearing for the petitioner would draw attention of this Court to a decision of this Court reported in 2002 4 CTC 550 (M.Govinda Gounder v. Pichandi Pillai and another) in which, it is observed that ultimately the burden to prove the allegation of fraud is very heavy on the person pleading fraud and in case if the plaintiff has not made any attempt to adduce any evidence, it has to be decided that the defence of the plaintiff ought to have been rejected. In this decision, a Division Bench decision of this Court in Lakshman Chettiar v. Jayarama Chettiar reported in 1971 (II) MLJ 292 has been referred in which it was held that where a debtor has several creditors and if he transfers one of his proerties to one of the creditors alone, it cannot be termed to be a case of fraudulent preference, without further materials and circumstances.
12. In 2006 (5) CTC 245 (Pinna Thevar v. M.S.Maniam and another), the learned Judge, while dealing with Section 53 of the Transfer of Property Act, has concluded that when the sale deed was executed and registered much earlier to the date of attachment, Section 64 CPC will not apply to the facts. In the said decision, a Supreme Court decision has also been referred and followed which is reported in Hamda Ammal v. Avadiappa Pathar and three others, 1991 (1)SCC 715 : 1991 (2) LW 110 wherein it was observed that even if the sale deed was executed prior to the institution of the Suit and the registration of the same had taken place long after the suit was instituted, the sale deed comes into operation from the very date of its execution, the moment the same was registered within four months from the date of its execution as contemplated under Section 23 read with Section 47 of the Registration Act.
13. It is the quintessence of the contention of the learned counsel appearing for the petitioner that much earlier to the filing of Execution Petition itself, the sale was held on 05.12.2005, that even though it was stated to have been executed on 30.11.2005 it was registered on 05.12.2005 and the effect of registration will date back to the date of execution and that there was no mala fide intention on the part of this petitioner.
14. The Executing Court has referred two judgments of this Court and one judgment of Punjab and Haryana High Court cited on behalf of the decree holder. A Division Bench of this Court, it its decision, reported in 1997 (II) CTC 83 (M/s.Arya Engineering v. Corporation Bank and three others) has held that when it is found that the transferee did not acquire the property in good faith and for consideration, it is well settled that the factum of finding rendered on the nature of transaction that it is hit by Section 53 as the effect that the property was transferred to avoid the debt of the creditor and purchaser cannot avoid debt by virtue of his purchase. The operative portion of the judgment goes thus:
"It is well settled that the factum of finding recorded on the nature of the transaction that a particular sale transaction or a transfer is hit by Section 53 of the Transfer of Property Act has the resultant effect that the property was transferred in order to avoid the debt in question of the creditor and it has no automatic effect of nullifying the transaction and that too in a claim petition alone, which came to be dismissed. The effect is the purchaser cannot avoid the debt in question by virtue of his purchase and it would be open to the creditor to get at the properties in accordance with law. The plea that there is no averment by the creditor that there are no other properties than the one under attachment and that there was no allegation that the transfer is a fraudulent one cannot meet with our approval or acceptance. This is a property, which is specifically hypothecated to the Bank and a person, who has recklessly purchased such a property without proper verification of the proceedings for the settlement of the claim of the Bank during the pendency of the proceedings for recovery of the debt having his eyes wide open and full knowledge of the debt and the proceedings, cannot project such a claim."
14.1. In the said case, the purchaser from the judgment-debtor filed claim petition under Order 21, Rule 58 and 59 CPC and the same was dismissed by the Executing Court. This Court upheld the dismissal. The L.P.A. before this Court preferred by the claim petitioner was also dismissed.
15. In AIR 1971 Punjab and Haryana 325 (Smt.Shallo Devi and another v. Mohinder Singh and others) which has been referred in the order impugned, a Full Bench judgment and another judgment of this Court have been mentioned and relied on. Concluding the judgment, the Division Bench of Punjab and Haryana High Court has held as follows:
"5. For the reasons given above, we hold that defendant 2 transferred the land in suit in favour of the plaintiff-appellants by means of the decree dated May 5, 1959, in order to defeat and delay his creditors particularly defendant-respondent 1, and that the latter was entitled to have the land in suit attached and sold in execution of his decree and that it was not necessary for him to file a suit for avoiding that collusive decree of May 5, 1959."
15.1. In the said decision, a decision of this Court rendered by Five Judges Bench reported in AIR 1920 Madras 748 (N.N.L.Ramaswami Chettiar v. Mallappa Reddiar) has been followed, in which, Wallis, Chief Justice opined, concurring with the views of other judges, as follows:
"The actual question referred to us is, whether it is open to an attaching decree-holder to plead in defence to a suit by the alienee whose claim has been rejected that the transfer to him was fraudulent under Section 53. For the reasons already given, I am of opinion that it is open to the judgment-creditor by virtue of Section 53, T.P.Act, to attach as the property of the judgment-debtor property which has been fraudulently transferred to the claimant with intent to defeat or delay creditors. If he knows of the transfer when he 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 which has next to be consider."
15.2. Another judgment of this Court relied upon by the Punjab and Haryana High Court is reported in AIR 1954 Madras 173 (Kallubandi Nanjamma v. Kethe Rangappa and others) in which, it is held that in order to satisfy and show the avoidance under Section 53, suffice it for the decree holder to levy Execution proceedings. The following is the expression of view by this Court:
"This Court, however, has consistently taken the view that when a decree-holder who has the right to avoid a transfer as in fraud of creditors brings the properties covered by the deed of transfer to sale in execution of the decree, that itself is sufficient avoidance under Section 53 of the Act and that the auction-purchaser is entitled to the benefit of the avoidance by the decree-holder."
16. From the above-said decisions, it emerges that in order to avoid the sale as contemplated under Section 53 of the Transfer of Property Act, it is enough for the decree holder to file the execution petition to bring the property to sell and he is not required to file any suit to declare the transaction as fraudulent one. Since the respondent has levied execution proceedings for attachment and sale of the property, he has satisfied the statutory requirements as adumbrated in Section 53 of the Transfer of Property Act. In addition to this, neither the judgment-debtor nor the transferee has shown good faith in the transaction and that it was supported by valuable consideration, which would also attract the provisions of this Section.
17. In the light of the above-said observations, drawn after following the principles laid down by this Court in the earlier decisions, it is held that there is no legal embargo for the respondent to bring the property of the judgment-debtor for attachment and sale. This position has been illuminatingly stated by this Court. I do not feel inclined to upset the findings and find any infirmity either legally or factually in the order impugned before this Court, which deserves to be confirmed and it is accordingly confirmed. This Revision Petition does not merit consideration.
18. In the result, this Civil Revision Petition stands dismissed. Consequently, connected miscellaneous petition is closed. No costs.
26.10.2009 srm Index : Yes / No Internet : Yes / No To The District Munsif Court, Thiruchengode.
S.PALANIVELU,J srm Order made in C.R.P.(NPD) No.93 of 2009 26.10.2009 Pre-Delivery Order made in C.R.P.(NPD) No.93 of 2009 To THE HONOURABLE MR.JUSTICE S.PALANIVELU Most Respectfully submitted (S.Ramesh) PA