N L N LAKSHMAN CHETTIAR Vs. JAYARAMA CHETTIAR

JUDGEMENT

(1.) DEFENDANTS 1 and 2 are the appellants. They purchased the suit property on 15th December 1953 from the legal representatives of one Krishnaswami Pathar. The plaintiff in execution of a decree obtained against Krishnaswami Pathar purchased the very property on 8th February 1960. The defendants having obstructed and succeeded,a suit was brought to set aside the summary order. Both the courts below have concurred in finding that the sale in favour of the defendants was a fraudulent preference within the meaning of Section 53 of the transfer of Property Act. In coming to that decision they were largely influenced by Abdul Majid Lebbai v. Papathiammal, They understood that decision as laying down the proposition that the test of fraudulent preference was to see whether the debtor retained with him any amount,however small,for his benefit,so that to that extent the creditors stood to be defeated. When the second appeal came before Alagiriswami J. in the first instance,he too perhaps thought that that was the effect of the decision and,on that view, he considered that the decision must be reconsidered. He, therefore, referred the matter to a Division bench.

(2.) IT seems to us that the courts below as well as Alagiriswami J. were not entirely correct,if we may say so,in understanding, in that way. The judgment in that case does not show that however small the benefit may be that was retained by the debtor, may be that was retained by the debtor, that would, in itself be proof of fraud. It would be obvious from the judgment that what influenced the decision in that case was the fact that the vendor had been arrested,but on payment of a small sum was released and the execution petition was pending. The court thought that the fact that the sale deed was executed after his arrest and before the adjourned date of the execution petition clearly suggested that it was executed with a deliberate intent to frustrate the appellant in that case and defeat and delay the creditors of the second respondent in that case. That was the main reason the sale was held to be a fraudulent preference. But, in addition to that fact reliance was also placed on retention with the debtor of a sum of Rs. 78/- out of the sale consideration of Rs. 600. The intention of, was not to lay down a proposition that, however small the benefit retained by the debtor out of the sale consideration might be, it would be sufficient by itself to hold the transaction to be a fraudulent preference. As a matter of fact,errachi Reddiar v. Vellayya Reddiar, 81 Mad LW 27 = (AIR 1968 mad 256) made a correct approach to, Whether any transaction is a fraudulent preference will depend upon the facts in each case.

(3.) WHERE a debtor has several creditors and some property and if he transfers that property to one of the creditors without any further circumstances appearing, that may be a preference, but it cannot be said to be a fraudulent preference. It has been repeatedly held that it is not improper for debtor to prefer his creditor among the many in order to discharge his debt by transfer of property. There should be something more than mere preference and the facts must establish that the preference is a fraudulent one. In Mushar Sahu v. Lala Hakimlal, ILR 43 Cal 521 = (AIR 1915 PC 115), the Privy Council observed:-