GRANDHI GURVAMMA Vs. CHALUVADI GOPALAM

JUDGEMENT

(1.) The revision petitioner is a creditor whose petition to declare the respondents insolvent was dismissed by the trial Court and the appellate Court.

(2.) The petitioner filed I. P. No. 23 of 1965 in the Court of the Subordinate Judge, Nellore, with the allegation that the petitioner obtained a decree in O. S. No. 73 of 1956 on the file of the District Munsif, Ongole, for Rs. 4,804-15-0 on 4-6-1956 against respondents 1 and 2 and their father. Proceedings in execution are pending and nothing has been realised till now in execution of that decree. Respondents 1 and 2 their father the late Chaluvadi Venkatasubbiah executed in favour of respondent No. 3 a divided son of Venkatasubbiah a mortgage by deposit of title deeds dated 1/04/1953 covering all their immovable properties to secure repayment of a sum of Rs. 7,925-7-2 due on an Anthakam executed by the assesses on 31/03/1953. The mortgage was evidenced by a memorandum which was not, however, registered. According to the petitioner, the mortgage was a clandestine transaction by means of which the properties of respondents 1 and 2 were kept beyond the reach of the creditors and the Income-tax Department while making it appear to the outside world that the properties were still theirs. The respondents and their father were assessed to income-tax of Rs. 55,298-15-0 for the assessment year 1951-52. When the Income-tax Department proceeded to recover the tax, the assessees moved the High Court of Madras in W. P. No. 746 of 1953 on 7-9-1953 for issue of a writ prohibiting the department from collecting the tax. They also filed C. M. P. No. 8503 of 1953 for stay of recovery of tax on which the High Court directed that the tax be paid in 12 monthly instalments of Rs. 5,000 each. The respondents did not comply with the said order, and made a further application to modify the earlier order on which a consent order was passed on 27-11-1953 that all the immovable properties of all the partners will be attached and attachment will continue till the disposal of the writ petition on the file of the High Court. It is alleged by the petitioner that in these writ proceedings, there was no whisper about the mortgage by deposit of title deeds executed by the respondents on 1/04/1953. The attachment under the aforesaid consent order was effected on 16-12-1953. But the third respondent had by that time instituted O. S. No. 316 of 1953 in the Sub-Court, Nellore on 4-12-1953 to obtain a mortgage decree for Rs. 84,000. Respondents 1 and 2 and their father remained ex parte and a preliminary decree was passed on 20/01/1954. Final decree followed on 15-9-1954. The writ petition was dismissed by the High Court and when the Collector proceeded to recover the amount he was confronted with the notice on behalf of the third respondent that the properties could be sold but subject to the mortgage decree in O. S. No. 316 of 1953.

(3.) The Government of India, therefore, filed O. S. No. 19 of 1957 in the Court of the Subordinate Judge, Nellore, against the mortgagors and the mortgagee for a declaration that the equitable mortgage on 1-4-1953 was sham, nominal and void and that the decree obtained thereon was fraudulent and collusive decree and could not affect the priority of the Income-tax Department in respect of the income-tax arrears. The mortgagors remained ex parte and the suit was contested by the mortgagee alone. The learned Subordinate Judge held that there was no valid and operative mortgage and no mortgage decree. Aggrieved by that decree of the learned Subordinate Judge, the third respondent herein (mortgagee) appealed to the High Court in A. S. No. 188 of 1959. The High Court by its findings of the trial court and held that the equitable mortgage decree and the decree thereon was valid.