HAKIM LAL Vs. MOOSHAHAR SAHU

JUDGEMENT

(1.) The circumstances which led to the litigations out of which these two appeals arise, so far as it is necessary to state them for the disposal of the questions raised before us, lie in a narrow compass, and although they were the subject of controversy in the Court below, were not disputed before us. On the 14 December 1900, the plaintiffs respondents commenced an action against Krishna Benode Upadhya, one of the defendants in these suits, for recovery of money due under a usufructuary mortgage. The plaintiffs apprehended that the defendant might alienate his properties before judgment, and made an application for attachment pendente lite. The application, however, proved infructuous, and was rejected on the 12th February 1901. On the 29 November following, the plaintiffs obtained a decree for a large sum of money against the defendant, and subsequently in execution of this decree attached the properties now in suit. Two claims under Section 278 of the Civil Procedure Code, were preferred by two different sets of persons, who are the appellants before us; their claim was founded upon two conveyances alleged to have been executed in their favour on the 2nd September 1901 by the defendant in the suit of the plaintiffs-respondents. The claims were allowed on the 13 September 1902. On the 12 September 1903 the decree-holders commenced the suits out of which these appeals arise under Section 283 of the Civil Procedure Code, and in each case they asked for a declaration that the properties in dispute still belonged to their judgment-debtor and were liable to be sold in execution of their decree against him. Suit No. 73 of 1903 impeached the conveyance executed by the judgment-debtor in favour of Lala Hakim Lal; suit No. 7 of 1903 related to the conveyance executed in favour of Karnta Prosad. Both the suits were defended, substantially on the ground that the conveyances were bona fide and for consideration, and had consequently created a good title in the purchasers which could not be successfully impeached by the execution creditor of the vendor. As regards the conveyance executed in favour of Lala Hakim Lal, the Subordinate Judge found upon the evidence that the consideration recited in the document was genuine, but he set aside the conveyance on the ground that it had not been executed bond fide, and that the effect of it had been to delay, if not to defeat, the creditors of the transferor. As regards the conveyance executed in favour of Kamta Prosad, the Subordinate Judge found on the evidence that the consideration recited in the document was fictitious, and that it was a contrivance by the vendor to place the property out of the reach of his creditors. In this view of the matter, the Subordinate Judge made a decree in favour of the plaintiffs in both the suits, and declared that the conveyances were inoperative as against the creditors. The purchaser defendant in each case has appealed to this Court. The two appeals have been argued, one after the other, and we propose to deal with them separately. As regards the conveyance executed in favour of Lala Hakim Lal, which was the subject-matter of suit No. 73 of 1903 in the Court below, the question arises in appeal No. 433 of 1904. As regards the conveyance of Kamta Prosad which was the subject-matter of suit No. 74 of 1903, the question arises in appeal" No 440 of 1904. We shall take up the latter case first, because no serious argument was advanced on behalf of the appellant to show that the decision of the Subordinate Judge is erroneous.

(2.) Their Lordships agreed with the Subordinate Judge and dismissed the appeal.

(3.) As regards the conveyance executed in favour of Lala Hakim Lal on the 2nd September 1901, the Subordinate Judge has found that it was for consideration. This finding has not been assailed before this Court on behalf of the plaintiffs respondents, and after an examination of the evidence on the record, we are satisfied that it cannot be successfully impeached. The conveyance recites that the transferor Krishna Binode was indebted to the transferee, Lala Hakim Lal, to the extent of Rs. 30,309, and was also indebted to the extent of Rs. 12,347 to various other creditors whose debts are specifically set out in the document. The total amount of indebtedness of Krishna Binode at the time of execution of this document, so far as the creditors mentioned in the document were concerned, therefore amounted to Rs. 42,656, and the deed purports to convey to Lala Hakim Lai various properties in satisfaction of those debts. The purchaser was to set off against the consideration for the conveyance the debt due to himself, and the remainder of the consideration was to be left in deposit with him for payment to the other creditors, for the obvious reason that most of the debts were secured by mortgages: Now it has been satisfactorily established in the present litigation that the debts mentioned in the document all represented genuine transactions, and the learned Subordinate Judge has found that they were in reality due at the time of the execution of the conveyance. He has further found that not only has the debt due to the purchaser been satisfied by a set off against the consideration for the deed, but also that the sum left in deposit with the transferee for payment to the other creditors has been duly applied in discharge of their claims. These facts have not been; and upon the evidence on the record as it stands cannot be, controverted. The Subordinate Judge, however, has declared the conveyance inoperative, because, in his opinion, the effect of it was to give an undue preference to some out of the many creditors of the transferor. This conclusion has been assailed, on behalf of the appellants, substantially on three grounds, namely: first, that inasmuch as the case of the plaintiffs was that the conveyance was nominal and without consideration, and as this case has failed, they are not entitled to succeed on the ground that the transaction was in fraud of the Creditors of the transferor; secondly, that if the action be treated as one to set aside a fraudulent conveyance under Section 53 of the Transfer of Property Act, it has not been properly framed, inasmuch as a suit of this description can be maintained only by, or on behalf of, all the creditors of the transferor; and thirdly, that in any event, the conveyance is not void or voidable under Section 53 of the Transfer of Property Act merely on the ground that, by means of it, preference was given to some among the many creditors of the transferor. In support of his first contention, it has been argued by the learned vakil for the appellants that the suit was in substance one under Section 283 of the Civil Procedure Code, that the object of it was to establish the right which the plaintiffs claimed unsuccessfully in the execution proceedings, and that the only ground upon which they impeached the validity of the conveyance was that it was without consideration, and a mere device on the part of the transferor to keep his property out of the reach of his creditors. It must be conceded that there is considerable force in this contention. An examination of the plaint as a whole convinces us that the suit was not framed with a view to obtain a declaration that the transfer in question was voidable at the option of the plaintiffs, because it had been made with intent to defeat or delay the creditors of the transferor. It is not necessary, however, to deal with this aspect of the case in detail; because in our opinion the appellants are entitled to succeed upon the merits.