UMARBHAI CHANDBHAI Vs. UNION OF INDIA

JUDGEMENT

(1.) THE only point that arises for consideration in this appeal against the decree of the subordinate judge of Salem in O. S. No. 21 of 1958 is whether the deed of gift, exhibit A-9, executed by the second respondent in favour of the appellants, his children by the second wife, is one intended to defeat and delay creditors and as such voidable at the instance of his creditors THE facts which have given rise to this appeal are these : Abu Bucker Sait, the second respondent, is a resident of Yercaud in Salem District. He was running a business in cloth at Madurai since June 20, 1945, under the name of A. B. H. Hussain and Company. Besides that, he possessed about 290 acres of coffee plantation in Yercaud. On August 9, 1945, he purchased for a sum of Rs. 35, 500 an extent of 9 acres of land in Kichilipalayam village, adjoining Salem Town. Besides, he had substantial balances in his bank accounts during the period material to the present case. THEre was also a terraced house owned by him in Guthiana in the State of Kutch. Abu Bucker had two wives and children by them. THE senior wife was living at Guthiana, while the junior wife and children born of her were with him (the second respondent) at Yercaud.

(2.) THE objects of his affection were only his wives and children, as is evident from the fact that under a registered will dated November 29, 1945, he disposed of his entire properties in their favour. It is claimed on behalf of the appellants that soon after the execution of the will, the second respondent realised that under the Mohammedan law its provisions could not stand to the extent of two-thirds of the properties disposed of and that, therefore, he wanted to execute a deed of gift in favour of his minor children by his second wife, namely, the appellants. In pursuance of that object he is said to have executed exhibit A-9 settling the Grange Coffee Estate on the appellants. THE reason given for the execution of this gift deed does not, however, appear to be correct. For, if that were so, one would have expected the second respondent to have executed a similar document in favour of his first wife and the children born through her. But, no such document ever came into existenceTHE second respondent declared in the deed of gift that possession of the coffee estate settled thereunder had been given over to the donees. Subsequent to the gift, the patta for the property was changed in favour of the donees and they have also been registered as the owners of the coffee estate with the Coffee Marketing BoardOn 30th April, 1947, the second respondent sold the Kichilipalayam lands for an amount which later on was found, in proceedings relating to assessment of income, to have brought him a net profit of Rs. 66, 640. This amount was included in his income for the purpose of assessment to income-tax for the year 1948-49. As a result, the total amount of tax payable by the second respondent for that year came to Rs. 47, 110-10-0. Although this assessment was confirmed on appeal by the Appellate Assistant Commissioner, and on further appeal by the Appellate Tribunal, this court, by its judgment dated 19th July, 1961, in R. C. No. 1 of 1957, held that the profit earned by the second respondent in the sale of Kichilipalayam lands could not be brought to tax, as it was not proved to be one obtained by any adventure in the nature of trade. But this judgment of this court was not rendered when the proceedings leading up to the present suit for the realization of income-tax were initiatedTHEre was another assessment to tax to the extent of Rs. 44, 096-14-0 for the year 1950-51 on the second respondent. It is said that the validity of this assessment is the subject-matter of a reference to this court, which is now pendingAs the assessee did not pay the two sums referred to above, the Income-tax Officer issued certificates under section 46(2) of the Indian Income-tax Act. In pursuance of these certificates, the Collector of Salem passed an order of attachment of the Grange Coffee Estate.

(3.) THE learned subordinate judge held that as the second respondent had conveyed all his immovable properties subsequent to the date of the gift, by the sale of the Kichilipalayam lands, he must be presumed to have intended to defeat his future creditors. We are unable to see how a mere alienation of immovable properties owned by the transferor could be taken as proving an intent to defeat the future creditors. Admittedly, the second respondent had a javuli business at Madurai and he had also a large cash balance in the banks. No inference of intention to defraud future creditors can therefore be drawn because the second respondent disposed of his lands shortly after making the gift. THE sale of the Kichilipalayam lands might perhaps be due to the fact that the second respondent was making a large profit out of that transaction that might not have been conceived as a means of denuding himself of the property to cheat his creditorsTHE evidence in the case shows that on 30th September, 1947, the second respondent withdrew a sum of a lakh of rupees with a view to take that sum to Pakistan. Presumably, he had at that time made up his mind to migrate to that country. It was, perhaps, because of that intention he wanted to settle properties on his minor sons, himself taking away the cash to the extent aforesaid to Pakistan. THE business at Madurai was managed by his brother and he was, perhaps, content to allow it to be so done. THEse facts make it probable that the execution of the gift deed was part of the arrangement conceived by the second respondent to facilitate his migration to Pakistan. If he were to go and settle in Pakistan, there could be no creditors after he left India. THE transfer could not therefore be one to defeat or delay any creditor, though, in the events that have happened, we find that one future creditor, namely, the income-tax department, was defeated. It was said that even now there are assets belonging to the second respondent, which can be proceeded against for the realization of arrears of income-tax. But we have no satisfactory evidence in regard to the same. Even so, we are unable to say that on the date when the gift deed, exhibit A-9, was executed, the second respondent could have had any intention to defeat or delay his future creditors, as he could not have anticipated such claims. He was not embarking on any trade on the other hand, his intention appears to have been to leave this country and proceed to PakistanWe are, therefore, unable to agree with the conclusion reached by the learned subordinate judge, We allow this appeal. THEre will be no order as to costs.