UNION OF INDIA Vs. HIMACHAL CO

JUDGEMENT

(1.) This is a second appeal by the plaintiff Union of India and arises out of a suit for a declaration that the mortgage deed dated 20-10-1950 executed by defendant No. 2 Ram Nath in favour of defendant No. 3 Himachal Co-operative Bank Ltd., and the decree in suit No. 49 of 1954 brought by defendant No. 1 against the mortgagor Ram Nath and his brother Bundi Lal be declared null and void and be set aside and that the sale in execution of this decree wherein the property was purchased by the Bank decree-holder itself be also quashed.

(2.) The brief relevant facts are that certain income-tax demands were pending against Chaudhry Bundi Lal and a recovery certificate was issued to the Collector for recovery of the amount under Sec. 46 of the Income Tax Act against him. The disputed house belonged to Bundi Lal. He apparently with a view to avoid the property being seized in the recovery proceedings executed a sale deed of the property on 4-6-1949 for Rs. 8000.00 in favour of his own brother Ram Nath. In this sale deed Rs. 5000.00 was shown paid cash at registration while the remainder was alleged to have been received before registration. On 28-10-1950 Ram Nath mortgaged this property in favour of the Bank of Sirmur for a sum of Rs. 5000.00 with interest at 8% per annum. This Bank later on came to be represented by the Himachal Co-operative Bank Ltd., defendant No. 1. Meanwhile the proceedings for recovery got underway before the Collector and on 30-11-1953 he attached the disputed property as the property of Bundi Lal for recovery of the amount due to the Income Tax Department from Bundi Lal following this attachment two suits were filed. Suit No. 49 of 1954 was filed by the mortgagee against both Ram Nath and Bundi Lal. In this suit a compromise was arrived at between the parties on 12-7-1956 and the suit was decreed for Rs. 5,263/.- in terms of the compromise. Another suit No. 145 of 1954 was filed by Ram Nath against the Union of India, the Collector and Bundi Lal wherein he claimed a declaration of his own title to the property in suit. This suit came to be dismissed with costs on 13-11-1957, the finding being that the sale in favour of Ram Nath was fictitious, collusive, fraudulent and without consideration and executed with a view to defraud the Department, the Collector apparently proceeded to sell the property on 2-6-1962 and it was purchased by one Dr. U.C. Chandna. On the other hand the civil court to effect its own sale in execution of the compromise decree, in suit No. 49 of 1954 sold the property and it was purchased by the Bank decree-holder itself. The objections of Dr. U.C. Chandna to the civil court sale were rejected. In this appeal the Union of India has attacked the mortgage in favour of the Bank, the decree, and the sale in execution of that decree as collusive and fraudulent. The Bank on the other hand pleaded bona fides in all its dealings. The trial court took the view that the plaintiff failed to prove that the sale deed dated 4-6-1949 in favour of Ram Nath was collusive and that even if the sale deed were treated to be collusive and illegal the Bank was a bona fide mortgagee for consideration and as such protected under Sec. 41 of the Transfer of Property Act. It observed that the Bank made all possible enquiries about the title of Ram Nath to the property in dispute through K. P. Agarwal, D.W. 1, its Manager. The suit was accordingly dismissed. In an appeal by the Union of India the lower appellate court held that the decision about the collusive and void character of the sale in favour of Ram Nath in suit No. 49 of 1954 could not bind the Bank as the Bank, though a prior mortgagee, was not a party to that suit. The lower appellate court, however, confirmed the finding of the trial court on both the counts and dismissed the appeal.

(3.) In this second appeal the learned counsel for the appellant has urged that the sale deed in favour of Ram Nath was fictitious as already held in suit No. 145 of 1954 and that even though the decision in that suit may not be res judicata against the Bank it has great evidentiary value under Sec. 43 of the Evidence Act and if this were given due weight the lower courts would not have found that the sale deed was not fictitious, collusive, fraudulent and void. To my mind it is not necessary to go into the question whether the sale deed had this character as between the two brothers and vis-a-vis the defrauded creditors amongst whom is the appellant. Assuming that this was so tie question for consideration is whether the mortgage in favour of the Bank was a good mortgage. Even though Ram Nath may not have a good title there may be little doubt that he had an ostensible title and, therefore, the question turns upon whether the Batik was a bona fide transferee for value. Oil this point the Bank has examined its Manager K. P. Agarwal, D.W. 1, and the trial court has considered the evidence. The nature of the institution also makes it likely that normal precautions would be observed before granting the loan. At any rate both the courts below have found that the mortgage in favour of the Bank by Ram Nath was protected under Sec. 41 of the Transfer of Property Act inasmuch as the Bank was a bona fide transferee. This I take to be finding of fact binding in second appeal. At any rate no infirmity has been pointed out in the finding of the courts below which could be taken note of in second appeal. If this finding is taken to be correct, as it must be, the question of real title of Ram Nath becomes immaterial.