# C. ABDUL SHUKOOR SAHEB v. ARJI PAP A RAO AND OTHERS

- **Citation:** [1963] Supp. 2 S.C.R. 55
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** S. K. Das, K. SuBRA RAo, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/c-abdul-shukoor-saheb-v-arji-pap-a-rao-and-others-2787
- **Pages:** 27

## Headnote

Fraudulent Sale-Sale effected to defeat creditor-Attachment of property sold-Rejection of purchaser's claim-Suit to
set aside claim order-Plea of fraudulent sale in defence-Main·
tainability-If such plea could be raised only in a representative
suit by creditors-Transfer of Property Act, 1882 (4 of 1882),
s. 53 (1)-Code of Civil Procedure, 1908 (Act 5 of 1908), 0. 1,
r. 8, 0. 21, rr. 58 to 63.
The appellant pur~hased the suit property under a sale
deed executed by defendant 4 on May 20, 1949.
Defendants
3 and 4 had been doing business in partnership, which, however, was dissolved on March 31, 1949. The deed of dissolution showed that the partnership owed debts to the extent of
Rs. 2! lakhs and that the suit property was alloted to defendant
4. The first respondent to whom money was due from the
partnership obtained a decree onJune 19, i951, and had the
suit property attached. The appellant filed a claim petition
for raising the attachment but it was dismissed. He then
instituted a suit to set aside the summary order under 0. 21,
r. 63, of the Code of Civil Procedure. The first respondent's
defence, inter alia, was that the sale was fraudulent intended
to defeat or delay creditors and, therefore, was invalid under
s. 53 (1) of the Transfer of Property Act, 1882. The appellant
pleaded that on a proper construction of s. 53 ( 1) of the Act, a
transfer which was voidable under the section could be avoided
only by a representative suit filed on behalf of creditors and
not by an individual creditor by way of defence to a suit to set
aside a claim order. The evidence in the case showed that the
appellant was not a transferee in good faith and that the
transfer itself was a scheme by the transferor with the knowledge and concurrence of the transferee to put the property out
of the reach of the creditors.
Held:
(1) that s. 53 (I) of the Transfer of Property
Act, 1882, rendered a transaction voidable at the instance of
the creditors if the transfer was effected with the particular in·
tent specified and that the statute did not prescribe any particular method of avoidance. There was nothing ins. 53 (I), as
1962
1962
C, A6du I Slrrikoor
Salub
v.
Arji Po/JG Rao
56
SUPREME COURT REPORTS [1963] SUPP.
it originally stood before the amendment of the section in 1929,
which precluded a defence by an attaching creditor to a suit to
set aside.a summary order under 0. 21, r. 63, Code of Civil
Procedure, that the sale in favour of the plaintiff was vitiated
by fraud ; and the amendment made no change in this matter.
(2)
that it was merely to have a uniform rule and to
avoid conflicting decisions that the third paragraph was inserted ins. 53 (I) so that after the amendment, the rule that a
suit by a creditor should be brought in a representative capacity
.vould apply as much to a suit to set aside a summary order
under 0. 21, r. 63, as to other suits.
(3)
that the terms of s. 53 (I) were satisfied even if the
transfa· did not "defeat" but only "delayed" the creditors.
The fact that the entirety of the debtor's property was not
sold could not by itself negative the applicability of the section
unless it was proved that there was other property left, ,ufficient
in value and of easy availability to render the alienation in
question immaterial for the creditors.
RMnaswam·i Ghettiar v.
Mallappa Reddiar,
1··
(1920) I. L. R. 43 Mad., 760, approved.
CIVIL APPELLATE jURISDWTION: Civil Appeal
No. 164 of 1962.
Appeal from the judgment and decree dated
Juoe 19, 1958, of the Andhra Pradesh High Court
in Appeal Suit No. 944 of 1953.
K.
Bhimasanlcaram, J. V. Krishna Sarrna
and T. Satyanarayana, for the appellant.
A. Ranganadham Ghetty, Miss A. Vedavalli,
N. Rajeshwara Rao and A. V. Rangam, for respondents 1 (a) and l (b).
1962. November 14. The Judgment of the Court
was delivered by
AYYANGAR, J.-This appeal comes before us on
a certificate of fitness granted by the High Court of
Andhra Pradesh under Art. 133(1)(a) of the Coustitu·
tiou.
.,
-
'
---'
2 S.C.R.
SUPRE

## Text

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,
2 S.C.R.
SUPREME COURT REPORTS
65
C. ABDUL SHUKOOR SAHEB
v.
ARJI PAP A RAO AND OTHERS
(S. K. DAS, K. SuBRA RAo and N. RAJAGOPALA
AYYANGAR, JJ.)
Fraudulent Sale-Sale effected to defeat creditor-Attachment of property sold-Rejection of purchaser's claim-Suit to
set aside claim order-Plea of fraudulent sale in defence-Main·
tainability-If such plea could be raised only in a representative
suit by creditors-Transfer of Property Act, 1882 (4 of 1882),
s. 53 (1)-Code of Civil Procedure, 1908 (Act 5 of 1908), 0. 1,
r. 8, 0. 21, rr. 58 to 63.
The appellant pur~hased the suit property under a sale
deed executed by defendant 4 on May 20, 1949.
Defendants
3 and 4 had been doing business in partnership, which, however, was dissolved on March 31, 1949. The deed of dissolution showed that the partnership owed debts to the extent of
Rs. 2! lakhs and that the suit property was alloted to defendant
4. The first respondent to whom money was due from the
partnership obtained a decree onJune 19, i951, and had the
suit property attached. The appellant filed a claim petition
for raising the attachment but it was dismissed. He then
instituted a suit to set aside the summary order under 0. 21,
r. 63, of the Code of Civil Procedure. The first respondent's
defence, inter alia, was that the sale was fraudulent intended
to defeat or delay creditors and, therefore, was invalid under
s. 53 (1) of the Transfer of Property Act, 1882. The appellant
pleaded that on a proper construction of s. 53 ( 1) of the Act, a
transfer which was voidable under the section could be avoided
only by a representative suit filed on behalf of creditors and
not by an individual creditor by way of defence to a suit to set
aside a claim order. The evidence in the case showed that the
appellant was not a transferee in good faith and that the
transfer itself was a scheme by the transferor with the knowledge and concurrence of the transferee to put the property out
of the reach of the creditors.
Held:
(1) that s. 53 (I) of the Transfer of Property
Act, 1882, rendered a transaction voidable at the instance of
the creditors if the transfer was effected with the particular in·
tent specified and that the statute did not prescribe any particular method of avoidance. There was nothing ins. 53 (I), as
1962
1962
C, A6du I Slrrikoor
Salub
v.
Arji Po/JG Rao
56
SUPREME COURT REPORTS [1963] SUPP.
it originally stood before the amendment of the section in 1929,
which precluded a defence by an attaching creditor to a suit to
set aside.a summary order under 0. 21, r. 63, Code of Civil
Procedure, that the sale in favour of the plaintiff was vitiated
by fraud ; and the amendment made no change in this matter.
(2)
that it was merely to have a uniform rule and to
avoid conflicting decisions that the third paragraph was inserted ins. 53 (I) so that after the amendment, the rule that a
suit by a creditor should be brought in a representative capacity
.vould apply as much to a suit to set aside a summary order
under 0. 21, r. 63, as to other suits.
(3)
that the terms of s. 53 (I) were satisfied even if the
transfa· did not "defeat" but only "delayed" the creditors.
The fact that the entirety of the debtor's property was not
sold could not by itself negative the applicability of the section
unless it was proved that there was other property left, ,ufficient
in value and of easy availability to render the alienation in
question immaterial for the creditors.
RMnaswam·i Ghettiar v.
Mallappa Reddiar,
1··
(1920) I. L. R. 43 Mad., 760, approved.
CIVIL APPELLATE jURISDWTION: Civil Appeal
No. 164 of 1962.
Appeal from the judgment and decree dated
Juoe 19, 1958, of the Andhra Pradesh High Court
in Appeal Suit No. 944 of 1953.
K.
Bhimasanlcaram, J. V. Krishna Sarrna
and T. Satyanarayana, for the appellant.
A. Ranganadham Ghetty, Miss A. Vedavalli,
N. Rajeshwara Rao and A. V. Rangam, for respondents 1 (a) and l (b).
1962. November 14. The Judgment of the Court
was delivered by
AYYANGAR, J.-This appeal comes before us on
a certificate of fitness granted by the High Court of
Andhra Pradesh under Art. 133(1)(a) of the Coustitu·
tiou.
.,
-
'
---'
2 S.C.R.
SUPREME COURT REPORTS
57
The following facts are necessary to be stated to
appreciate the contentions urged before us. \Ve consider it would be convenient to refer to the parties by
their array in the trial Court. The 2nd defendantfirm Hajee Abdul Kadir Sahib and Lala Batcha
Sahib & Co., had been apparently carrying on business in several places including Viiianagaram, Bellary,
Madras etc., m skins and hides since 1941 when the
partnership was formed between the 3rd and the
4th defendants. It was common ground that from
about 1947 or 1948 the firm had not been doing any
businesss in Vizianagaram and by that time it had
contracted quite a large volume of debts, the tannery
business there proving a loss. The two partners accordingly entered into a deed of dissolution dated 1'Iarch
31, 1949, in which it is stated that the book-debts,
stock in trade, immovable properties and other assets
including the goodwill.of the firm were of the value
of Rs. 2,90,000/-, and at the same time that the
partnership which was admitted to be suffering losses
owed debts to the extent of Rs. 2t lakhs. It was
agreed between the partners that the 3rd defendant
Abdul Shukoor Saheb should go out of the partnership taking with him one item of property in
V aniyambadi valued at Rs. 20,000/- while the suit
tannery which was estimated as of the same value was
to become the sole property of the 4th defendant who
was described in the deed as "the continuing
partner". Soon after this deed of dissolution the 4th
defendant entered into an agreement
with the
plaintiff for the sale to him of the suit property for
a sum of Rs. 19,000/-. and later executed the deed of
sale on May 20, 1949. The plaintiff was, however,
advised that it would be safer to have the conveyance
in his favour executed by the other partner also and
accordingly the 3rd defendant was also an executant
of the sale deed. On the execution of the sale deed the
plaintiff entered into possession and he claimed to
have
thereafter effected
improvements
to the
property.
1962
C. Abdul Shukoor
Salub
v.
Arji I'apa Rrzo
Ayyangar, J.
1962
C • .4bt!ul Sh""-
SaAtb
v.
Arji Papa R•
58
SUPREME COURT REPORTS [1963] SUPP.
While so, the 1st defendant-Arji Papa Raofiled suit 0. S. 46 of 1950 in the Court of subordinate
Judge at Visakhapatnam for the recovery of a sum
of Rs. 12,950/5/8 against the 2nd defendant firm and
its partners defendants 3 & 4 and obtained a decree
for the sum claimed with interest and costs on June
19, 195l. Soon after filing the plaint he obtained an
order for attachment before Judgment of the suit
property and that order was on the passing of the
decree made absolute, subject however, to the result
of a claim petition which had been filed by the
plaintiff for raising the attachment. The Subordinate
Judge of Visakhapatnam dismissed the plaintiff's
claim and this has led to the suit 0. S. 145 of 1951
out of which this appeal arises to set aside that
summary order under 0. XXI, r. 63, Code of Civil
Procedure. The plaintiff impleaded as parties to the
suit besides the attaching decree-holder who was made
the 1st defendant, the debtor-firm and the two partners as defendants 2 to 4 respectively and the son of
the 4th defendant who executed the sale deed as
his agent under a power of attorney a5 the 5th defendant.
The plaintiff claimed that he purchased the
property bonafide and for its full value, that since its
purchase he having entered into possession, was in
enjoyment thereof in his. own right, payiug the rates
and taxes due thereon and had effected valuable
improvements thereto, and that consequently the
property was not liable to be attached as belonging to
the partnership or any of its partners.
Broadly stated, the defence of the 1st defendantthe only contesting defendant, the others either
remaining ex parte or supporting the plaintiff, was
that the sale in favour of the plaintiff was either a
sham and nominal transaction or in fraud of creditors of whom he was one. The trial court upheld the
plaintiff's claim that the sale was real and was fully -
,.
2 s.c.R.
SUPREME COURT REPORTS
59
supported by consideration. It also negatived the
contention raiserl by the first defendant that the sale
was fraudulent as intended to defeat or delay creditors under s. 53 (1) of the Transfer of Property Act.
The 1st defendant filed an appeal to the High Court
and the learned Judges reversed the decision of the
trial-Judge and directed the dismissal of the plaintiff's suit. It is the correctness of this decision that
is challenged in this appeal.
Learned counsel for the appellant raised four
principal points in support of the appeal : ( 1) that
on a proper construction of the written statement the
only real and effective defence that was raised was
that the sale in favour of the appellant was sham
and nominal and that the Courts below were in error
in proceeding on the basis that the sale was in the
alternative impugned as brought about to defeat or
delay creditors within s. 53 (1) of the Transfer of
Property Act; (2) that on the facts and circumstances
of the case it had not been established that the sale
in favour of the appellant was vitiated by fraud
against creditors falling within s. 53 (1) of the Transfer of Property Act; (3) that in any event, the
plaintiff was a purchaser in good faith and for valuable consideration and was therefore protected even
on the basis that the transferor intended, by the
alienation, to defraud his creditors; ( 4) that on a
proper construction of s. 53 (1) of the Transfer of
Property Act, as it now stands, read in the light of
the provisions of the Code of Civil Procedure particularly those relating to claim petitions under
O. XXI, rr. 58 to 63, a transfer which was voidable
under s. 53 ( 1) could be avoided only by a representative suit filed on behalf of creditors and not by an
individual creditor who may be defeated or delayed,
by way of defence to a suit to set aside a summary
order under 0. XXI, r. 63, Code of Civil Procedure.
We shall deal with each ofthese points and in
that order. There is no doubt that the written
1962
C • .Abdul Shukoor
s,,Mb
v.
Arji Papa Rao
AJ1angar, J.
1962
C. Abdul Shukoor
Sah16
v.
Arji Papa Rao
A,yyangar, J.
60
SUPREME COURT REPORTS [1963] SUPP.
Statement has not been artistically drafted, keeping in
view the real distinction between a sham and nominal sale which is not intended to pass title and a sale
which is real but which is voidable at the instance
of creditors because the transfer is intended in the
language of s. 53 ( 1) of the Transfer of Property Act
"to defeat and delay creditors". In paragraph 2 of
the Written Statement the 1st defendant stated :-
"The said sale deed is sham, nominal and
collusive document not intended to pass any
title but brought about to screen the suit properties from the creditors of defrndants 2 to 5.
No consideration passed under the sale deed
and the recitals thereof in the document are
fictitious and make-believe."
The paragraph however, further went on to add :
"l t is further submitted that even if the sale
deed is true, it is in fraud of creditors including
the plaintiff and not binding on t.hem."
In paragraph 3 the allegation was made that the
plaintiff was the relative of defendants 2 to 5, that
the plaintiff and the vendors were natives of the same
place and that the sale deed was clandestinely
brought into existence at Madras at a time when
defendants 2 to 5 were hard-pressed by the plaintiff
and other creditors and unable to pay their debts at
Vizianagaram and that in order to put the propt>rties
beyond the reach of the creditors, defendants 2 to 4
seem to have hit upon the fraudulent device of the
alleged sale to the plaintiff". In the light of these
averments it cannot be said that the defendants did
not raise two distinct pleas (I) that the sale was a
sham, a pretended sale without any consideration and
not intended to pass any title to the nominal purchaser and in the alternative (2) that even if it were a
2 S.C.R.
SUPREME COURT REPORTS
61
real transaction supported by consideration and intended to pass title to the plaintiff, still the same was,
having regard to the circumstances stated, a fraud
upon the creditors and therefore voidable at his instance. Though the pleading in the Written Statement was in this form, the issues struck did not raise
the two defences as distinct pleas but rolled both of
them into a single plea raising the question "whether
the plaintiff had title to the suit property and whether the claim order was liable to be set aside."
Notwithstanding the indefiniteness in the frame
of the issues it could not be said that when the parties
proceeded to adduce evidence the same was not directed to both the above defences.
Ail we have necessarily to consider this evidence in dealing with the
submissions made to us regarding the corre.:tness of
the dismissal of the plaintiff's suit by the High Court
it is unnecessary to set out the details of the evidence
which indicates that the defence based upon s. 53 of
the Transfer of Property Act was borne in mind.
At the stage of the arguments before the trial Judge
it was the subject of keen contest between the parties.
The learned trial Judge first dealt with the question
as to whether the sale was real as pleaded by the
plaintiff or whether it was without consideration and
sham and nominal not intended to pass any tittle, and
recorded a clear finding in favour of the plaintiff.
After having done so he considered in detail the various circumstances which were relied on by the first
defendant in support of the plea that the sale was in
fraud of creditors so as to be voidable under s. 53(1)
of the Transfer of Property Act. He negatived this
;
plea and upheld the plaintiff's claim to the Property
and passed a decree in his favour.
In these circumstances we consider that there is no force in the objection that there has not been a sufficient plea of a
defence based upon s. 53 of the Transfer of Pro)?erty
Act as to justify or entitle the court to afford rehef if
satisfied that the same was proved.
1962
0. Abdul Shu•oar
Salwb
v.
ArjiPapa Rao
Ayya11gor, J.
1962
C. Abd•I Shukoo
Sahib
v.
Arji Papa Rao
A1}Qngar, J.
62
SUPREME COURT REPORTS [1963] SUPP.
Before dealing with the second point it is necessary to make a few observations in relation to certain
submissions made by learned Counsel for the appellant. This was in relation to the manner in which
the learned Judges of the High Court had approached
this question and arrived at a conclusion adverse to
his client. The learned Judges had formulated the
questions to be considered in the appeal as follo"W"S :-
"The main point that falls to be considered in
this appeal is whether the rnle deed in favour
of the plaintiff, Exhibit A-2, is a genuine transaction supported by consideration; and, if on
this point the finding is in favour of the
plaintiff, the further question that falls to be
determined is whether the suit sale-deed was
executed in fraud of creditors and as such not
binding on the first defendant and other credi •
tors of defendants 2 to 5. If the finding on
this issue is that the transaction was in fact in
the fraud of creditors, the further question that
would arise for consideration: is whether the
plaintiff could claim to be the transferee in
good faith and for consideration so as to claim
the benefit of the exemption contained in
section 53 of the Transfer of Property Act."
Learned Counsel had no quarrel with the propositions as here set out or the mode of approach, but his
complaint was that in dealing with the appeal these
were not kept in view. He urged that they did not
consider either initially or even later the question as
to whether the sale to the plaintiff was real or was
sham and nominal unsupported by consideration and
though they stated in one portion of the judgment
that they did not propose to consider this question
because they were satisfied that the decision on the
other points might be sufficient to dispose of the
appeal/"yet they made passing observation which
appeared to throw doubt on the reality of the sale.
2 S.C.R.
SUPREME COURT REPORTS
63
Again, learned Counsel pointed out that though they
had formulated the two questions viz., (1) assuming
the sale to be real whether the sale was intended by
the transferor to defeat or delay creditors, and (2)
assuming the sale was voidable under s. 53( 1) of the
Transfer of Property Act whether the plaintiff was
a bona fide purchaser in good faith, as distinct and
separate questions, in the discussion which followed
they did not keep these two points separate. Besides,
it was urged that there were some statements or
assumptions made in the judgment which were entire·
ly not warranted by the facts.
We cannot say that
there is not some force in these submissions. In view
of this, the course which we intimated to the learned
Counsel that we would adopt was that we would
ourselves consider the entire evidence on the record
and arrive at our own conclusions on such evidence
in regard
to the
two issues:
(a) whether the
sale was in fraud of creditors, and (b) whether
the
plaintiff was a
bona fide
purchaser for
value and that if it became necessary to arrive at
any finding as regards the reality of the sale, we
would remand the appeal to the High Court for the
matter being considered since the learned Judges had
expressly reserved the consideration of that question.
We shall now proceed to consider the facts and
circumstances of the case which are relevent to the
issue as to whether the sale was to defeat or delay
creditors. There was some argument before us about
the burden of proof in such cases
but learned
Counsel for the appellant submitted that he would
assume for
the
purpose of
ari?;ument that the
onus
was
upon
the
plaintiff-purchaser
and
that he would satisfy us that that burden had
been discharged. This apart, we consider that the
question of onus of proof is merely academic at this
stage because the entire evidence is before us and
except in a rare case where 'the cm;isiderations are
evenly balanced, it would have little significance.
1962
C. A.bd11l Sltu'ltoor
S11M
v.
Arji Papa Rao
Ayyt1ngar, J.
1962
C Abdul Shuko01
Sahib
"·
Arji Papa Raa
Ay10n1ar, J.
64
SUPREME COURT REPORTS [1963] SUPP.
The circumatances which are relevant for the consi·
deration of this
question are these: The second
defendant.firm was in financial embarrassment at the
time of the sale. The deed of dissolution dated
March 31, 1949 recites that the business carried on
by the firm was resulting in losses and that the debts
amounted to about 21 lakhs of rupees. No doubt, it
is there stated that the assets of the firm were by consent of the parties estimated of the value of
Rs. 2,90,000/-. This estimate however included the
value of the goodwill, which would not be of any real
value in the case of a losing business of this sort and
we do not know how much was attributed to this item.
This apart, the assets were said to be made up of
book-debts, stock in trade, immovable property etc.
There is however, no indication as to the relative
value of these several components to judge whether or
not the alienation of the suit property would have
the effect of delaying, if not defeating the creditors.
It can however be asserted that the picture presented
by the deed of dissolution is certainly of a firm whose
finaneial position was far from satisfactory. There
is no evidence on the record whether the partners or
either of them had any property of their own besides
the assets of the partnership for discharging the' debts
due to the firm's creditors. Though the 4th defendant
filed a written Statement supporting the plaintiff, the
plaintiff did not choose to examine him as a witness
in order to elucidate this matter or otherwise explain
the circumstances in which the impugned sale was
effected.
The next feature to be noticed is that the
plaintiff and the 4th defendant were both members of
the same community-labbais of North Arcot district,
a fairly small and well-knit community several
of whom are engaged in the hides and skins business.
The learned Judges of the High Court have referred
to the plaintiff and the 4th defendant as natives of
the same place and as relatives. Learned Counsel
2 S.C.R.
SUPREME COURT REPORTS
65
for the appellant pointed out that whereas the 4th
defendant was a native of Vaniyambadi, the plaintiff
was native of Parnambet and the suggestion made
that they were relatives had been denied in the
evidence. Learned Counsel might be right on these
matters but we consider that not much turns on them.
Both of them were conducting business in Madras
and the plaintiff had also a business in Vizianagaram
though it was in bidis and not in hides and skins.
In these circum~tances we consider that it matters
little whether they were relatives or not. The
significance of the plaintiff and his vendors being
members of the same community and well-known to
each other consists in this, th at the plaintiff might
have been chosen because of his willingness to take
the sale without any searching enquiry as to the
circumstances necessitating it, and because there
would be less publicity in the transaction being put
through betwt"en them-such as for instance inspection
of the property or enquiries in the locality as regards
value etc.. which would take place if the sall' was to
be to a total stranger which would attract the
attention of the firm's creditors.
The next circumstance is as regards the pre·
ssure exerted on the 3rd and 4th defrndants by the
creditors immediately prior to the impugned sale and
which, in the normal course of events, wou Id be relevant as providing that the sale was effected in order
to put the property beyond the reach of creditors by
converting it into cash. On April 20, 1948. 0. S.
162 of 1948 on the file of the District Mnnsiff'~
Court, Vizianagaram was filed for the recovery of
Rs. 1,016/· on a promissory note for Rs. 1,00_0/-
executed by the firm.
On September 8, 1948, it was
reported as adjusted out of court. Besides this some
other suits were filed for the recovery of amounts
from the partnership but they were defended and
were ultimately
dismissed.- Then we come to
1962
C. AbJ11l
Js11,11r
Sud
y,
A~ii Popa R•
AyJanl&r, I.
1962
C. Abdul Shukoor
Sahtb
v.
,f,jj PafJd Rat
.4 p1angar, J,
6fi
SUPREME COURT REPORTS (1963] SUPP.
0. S. HH of 1949 in which the plaint was presented
on April 4, 1949, for recovery of a sum of Rs. 1,385/-
and odd which was decreed with interest and costs
on November 22, 1949. Thi: date on which this
last mentioned suit was filed is of some significance
because of another suit which was filed at about
the same time. One Damayanti presented a plaint on
March 9, l 949, against the firm for the recovery of
Rs. 3,000/· being the principrtl and interest due on a
promissory note.
fhe date fixed for the appearance
by the defendant was April 4, 1949. It will be
noticed that the deed of dissolution was executed on
March 31, 1949. The defendant did not enter
appearance on th.e day fixeJ and the Court passed
an ex parte decree on April 5, I 949; for the amount
claimed. She filed an application for execution on
April 18, 1949, and obtained an order on April 21.
1949, for the attachment of the suit property though
the attachment was actually effected on June 8, 1949,
because the court was closed for the summer vaca·
tion.
Long befol'>! these dates the 4th defendant
had made up his mind to alienate the suit property
and we have a letter from the 4th defendant to the
plaintiff as early as February 5, 1949, which evi·
dences negotiatiom for the sale of the property.
There was apparently some higgling about the price
which caused some delay and a few days after the
attachment was ordered, on April 27, 1949, a formal
agreement of sale was entered into between
the
plaintiff ard the 4th defendant under which he agreed
to purchase the property for a !Um
of Rs. 19,000/·
and the agreement recited that the purchaser, i. e.,
the plaintiff had paid a sum of Rs. 10,000/· in
advance as earnest money and the sale deed itself was
executed on
May 20, 19411. In pursuance of the
order dated April 21, 1949, Damayanti attached the
suit property as already stated on June 8, 1949 and
thereupon the plaintiff filed a claim under O. XXI,
r. 59, Code of Civil Proct>dqre, for raising the
t
! S.C.R.
SUPREME COURT REPORTS
G7
attachment but this, however, was dismissed on
November 16, 1950, and thereafter the amount of
the decree was paid up by the judgment-debtor
just a few days before tile expiry of the one year
period of limitation for filing the suit under 0. XXI,
r. 63, Code of Civil Procedure. A suggestion was
made to the plaintiff while he was examined in the
case that it was he who had paid up the decree debt
of Damayanti but he denied it and we shall proceed
on the basis that that debt was discharged by the
judgment-debtors themselves.
For the purpose of
establishing that the firm was hard pressed by its
creditors at the time of the negotiations which resulted in the sale impugned in these proceedings and at
the time of the sale, it matters little who paid this
decree-debt.
Next we have the circumstance that though the
properties were at Vizianagaram, the document was
registered at Madras and the suggestion made to the
plaintiff was that this was meant as a measure of
secrecy to keep this alienation from the knowledge of
the firm's creditors. The explanation offered by the
plaintiff was that having regard to the distance between the native places of the two parties from
Vizianagaram and the proximity of these to Madras
and the fact that both the Plaintiff as well as the
executants were at Madras it was found more convenient to have the document presented for registration at Madras instead of incurring the expenses of a
journey to Vizianagaram for havingh registered there.
The learned trial Judge accepted this explanation and
held that the registration of the sale deed at Madras
was not a suspicious circumstance indicating an intention to keep the transaction secret. The learned
Judges of the High Court, however, considered it
otherwise and expressed the view that this was done
in order to keep the transaction secret. We are inclinaJ to agree with the learned Judges of the High Coun
1961
C. Abdol Sltukoor
Sahib
v.
Arji Pqa Rao
AJJ•"I"'·· J.
1962
C. AbtW Sludoo•
Sahib
v.
A.Ii P•po &o
AJY'"tar, J.
68
SUPREME COURT REPORTS [19631 SUPP.
in their appreciation of this piece of conduct.
Admittedly, the 4th defendant had his agents at
Vizianagaram and similarly the plaintiff himself had
his men there to look after his bidi business. There
was no impediment in these circumstances and no
expenses of travelling involved if only the 4th defen·
dant had executed a power of attorney iu favour of
some one at Vizianagaram to present the document
for registration and admit its execution. In fact, it
may be mentioned that even the sale deed now
impugned was executed not by the 3rd and 4th
defendants but by the 4th defendant's son-K. L.
Abdulla in whose favour a general power of attorney
was executed on April 26, 1949, apparently immediately the agreement for sale was concluded. It is in
the light of this feature that we are not d'sposed to
dismiss as irrelevant the circumstance that the docμment was registered at Madras.
The next feature of the case to which we must
direct attention relates to the purpose for which the
sale was executed.
As regards this, there
is no
evidence led to indicate why exactly the 4th defendant desired with some urgency to dispose of the
property at that juncture. The relevant circumstance
in the present case is that there was a great deal l'f
pressure from creditors, who not having been paid the
amounts due to them as and when they became due,
were forced to file suits and those which were decreed
were those which were not defended and the firm was
mulcted with costs under each of these decrees. In
the circumstances one would expect an explanation
as to why the sale was being effected. Ordmarily in
circumstances such as in this case there could only be
two alternatives : (I) a sale in order to pay the ere·
ditors out of the proceeds obtained; and (2) a sale in
order to convert
immovable property which was
capable of being attached and brought to sale for
the realisation of the amounts due to the creditors
t
2 S.C.R.
SUPREME COURT REPORTS
69
into cash, which could either be secreted or used for
the vendor's own purposes. If the purpose was as
that indicated in the first of the above alternatives
the proceeds of the sale would have been earmarked
for the payment of particular debts for which pressure was the greatest. It is needless to add that if
this were the case and if creditors who were not so
provided were defeated or delayed it would merely be
a case of a fraudulent preference which could be
impugned only under the law relating to insolvency
and not as a fraud on creditors for which s. 53 of the
Transfer of Property Act makes provision. It is,
however, common ground that apart from the sale
deed not making any provision that the consideration
was to be utilised for the discharge of any particular
debts, it is not the case of the plaintiff that there was
any such stipulation as to the application of the
money or that without any stipulation therefor the
money was so utilised. It would therefore not be an
unreasonable inference to draw from the circumstances
of the sale at _the juncture at which it took place that
the vendor's_object was merely to convert this immovable property into cash, so that it may not be available to the creditors.
Before leaving this point it is necessafo/ to advert
to one matter which was suggested by learned Counsel
for the appellant. He submitted that the property
sold was only a part of the assets of the partners and
that unless there was evidence to show that nqthing
was left available for the creditors after the impugned sale, its validity could not be impugned under s. 53
of the Transfer of Property Act. We consider that
there is no force in this submission.
As a matter of
fact, there is no evidence as to what other properties
the partners had beyond what is contained in the
deed of dissolution on March 31, 1949. But that
apart, the terms of s. 53(1) are satisfied even if the
transfer does not "defeat" but only "delays" the
1961
C. Abdol SW..,
Saltlb
v •
.Arji Papa Rao
A.J'.JOllt• I J'
1161
C. Abdul Shukoor
Sali.b
v.
Arji Papa R ..
70
SUPREME COURT REPORTS (1963] SUPP.
creditors. The fact therefore that the entirety of the
debtors' property was not sold cannot by itself negative the applicability of s. 53(1) unless there is cogent
proof that there is other property left, sufficient in
value and of easy availability to render the alienation
in question immaterial for the creditors. In the present case, as already pointed out, we have no definite
evidence as to the nature and quality of the property
left as available to the creditors after the impugned
alienation, and though light on this could have been
thrown by the 4th defendant being called as a witness, the plaintiff did not choose to take the step, nor
indeed did he even summon the production of the
accounts of the firm which might have disclosed the
true state of affairs.
Each of these circumstances might be capable
of some explanation consistent with the case that the
transfer now impugned was effected in the normal
and ordinary course of business by the 4th defendant
for some purpose which did not involve an intention
to defeat or delay his creditors, but the question we
have to consider is their cumulative effect and so
viewed the conclusion appears irresistible that the
object of the transaction was to put the property out
of the reach of the
creditors. The transfer was
therefore plainly within the terms· of the 1st paragraph of s. 53 ( 1) of the Transfer of Property Act
and was voidable at the instance of the 1st defendant
who was a decree-creditor.
The next question is whether the plaintiff is
a bona fide purchaser for value so as to be protected
by the second paragraph of s. 53 (1) reading :
"Nothing in this section impairs the rights of
the transferee in good faith and for consideration."
As stated earlier, the learned trial Judge held that
the Rs. 19,000/-, the sale price was the full value of
I'
2 S.C.R.
SUPREME COURT REPORTS
71
the property and that the consideration as recited in
the document was paid by the purchaser.
This
finding has not been set aside by the High Court.
We are, therefore, pr01:eeding on the basis that the
Transfer was real and supported by consideration.
The narrow question is wliether the plaintiff was a
transferee in good faith. It was submitted on behalf
of the appellant that the learned Judges of the High
Court had directed the dismi'ISal of the plaintiff's
suit even
without a
definite finding that the
plaintiff was a party to the fraud on the part of the
transferor
to defeat
or
delay
the creditors.
There might be some force in this submission that
there is no specific finding to that effect but that does
not in any way assist the appellant. Where fraud
on the part of the transferor is established i. e. by
the terms of paragraph (1) of s. 53(1) being satisfied,
the burden of proving that the transferee fell within
the exception is upon him and in order to succeed
he must establish that he was DOt a party to the
design of the transferor and that he did not share the
intention with which the transfer had been effected
but that he took the sale honestly believing that the
transfer was in the ordinary and normal course of
business.
When on<:e the conclusion is reached that
the transfer was effected with the intent on the part
of the transferor to convert the property into cash so
as to defeat or delay his creditors, there cannot be
any doubt on the evidence on record that the plain·
tiff shared that intent. · For this purpose the follow·
ing circumstances may be pointed out :
(1) The plaintiff and the vendor belong to the
same community, a small, compact and well-knit one
and they must obviously have known each other
having been in trade for several years in scvera l
places in common and must therefore have been wellacquainted with the financial and business affairs of
each other.
1962 -
C. Abdul Shukoor
Salub
v.
A•ji Papa Hoo
Ayyangar, J.
1961
C. Abdul SAukoor
SaA1b
v.
bji Pupa Ra1
"-'111nga1, J.
72
SUPREME COURT REPORTS [1963] SUPP.
(2) This general inference apart, the plaintiff
admittedly had with him a copy of the deed of dis·
solution dated March 31, 1949, which disclosed that
the firm's business had resulted in losses and that it
was greatly indebted, the debts amounting to Rs. 2i
lakhs.
(3) If as we have held that registration of the
sale deed at Madras was with a view to keep the
transaction secret from the creditors, the plaintiff was
as much a party to the secrecy as the transferor.
( 4)
One matter which would be of considerable relevance and significance in this connect ion
would be the enquiries that the plaintiff made before
he took the transfer. He no doubt led evidence to
show that he consulted his lawyers about the title of
the vendor; but any attempt at an enquiry of the 4th
defendant as
to why
he
was effecting the
sale of the only
immovable property of the firm
which was alloted to ·him under the deed of disso·
lution is significantly absent.
In the circumstances, it. stands to reason that
the plaintiff must be fixed with notice of the design
in pursuance of which the transfer was effected. If
the object of a transferor who is heavily indebted was
to convert his
immovable property into cash for
keeping it away from his creditors and knowing it the
transferor helped him to achieve that purpose it has
naturally to be held that he shared that intention
and was himself a party to the fraud. In this connection, there is one circumstance which is rather signi ·
ficant. Even when the plaintiff was fixed with notice
that the firm's business had been running at a los~
and had accumulated a very large volume of debts
as disclosed by the recitals in the deed of dissolution
which was placed in his hands, the purchaser did uot
insist that the consideration which he was paying
should be utilised for the discharge of at least some
'
(
2 S.C;R.
SUPREME COURT REPORTS
73
of the debts. We are therefore satisfied that the
plaintiff was not a transferee in good faith and that
the transfer itself was a scheme by the transferor with
the knowledge and concurrence of the transferee to
put the property out of the reach of the creditors.
The result therefore would be that the plaintiff's suit
was liable to ·be dismissed for the reason that the
defence plea invoking s. 53 (1) of· the Transfer of
Property Act was made .out.
What remains for consideration is a point of
law that was raised on behalf of the appellant that
a transfer .which is voidable under s. 53 (I) of the
Ttansfer of Pi'operty Act can be avoided only by a suit
filed by a creditor impugning the transfer on behalf
of· himself and the other creditors and not by way of
defence to a suit under 0. 21, r. 63, Code of Civil
Procedure by a claimant whose application has been
rejected in summary proceedings under 0. 21, rr. 58
to 61, Code of Civil Procedure.
Section 53 (1) of the Transfer of Property Act,
as it stands at present, is, as amended by the Transfer
of Property (Amendment) Act (Act 20 of 1929). As
part of the argument on this head was based on a
comparison of the provisions of the section before and
after the same was amended, we shall set out in
parallel columns s. 53 (1) as it stood before it was
amended in.1929.and _~_it S!ands as amended :
B. 53(1) as it stood before'! S. 53 (1) as it Btands
the Amending Act, 1929. I ajter the Amending Act,
I 1929.
"Every
transfer
of
immovable
property
made with intent to defraud prior or subsequent
"Every transfer of immovable property made with
intent to defeat or delay
the
creditors
of the
1962
C.Ai4rdSW...
s..v•
y,
A>ji,..,. Ra•
AJ',_I.,. J •
1961
C, Abdul S/nJ:oor
Sahib
...
Arj;P.,.&o
A.~zar, J.
74
St:JPREME COURT REPORTS [1963] SUPP.
S. 53 (1) as it stood bejare I S. 53 (1). as it stands
the Amending Act, 1929. j after the Amending Act,
1929.
transferees thereof for
consideration
or
coowners or other persons
having an interest in
such property or to de·
feat or delay the • credi·
tors of the transferor, is
voidable at the option of
any person so defrauded
or delayed.
Where the effect
of
any
transfer
of
immovable
property is
to defraud, defeat or delay any such person, and
such
transfer is made
gratuitously or for
a
grossly inadequate consideration, the transfer
may
be presumed to
have been made with
such intent · as aforesaid.
Nothing contained
in this section shall im ·
pair the rights of any
transferee in~ good faith
and for consideration."
· transferor shall be voidable at the option of any
creditor so defeated ot
delayed.
Nothing in this subsection shall impair the
rights of a transferee in
good faith and for con·
'sideration.
Nothing in this subsection shall affect any
law
for
the
time·
being in force relating to
insolvency.
A suit instituted by
a creditor (which term
includes a decree-holder
whether he has or has
not applied for execution
of his decree) to avoid a
transfer on the ground
that it has been made
with intent to defeat or
delay the creditors of the
transferor, shall be in·
stituted on behalf of,
or for the benefit of, all
the creditors."
Two points were made by the learned Counsel
in support of this submission; the first being indepen ·
dent of the amendment effected by the Act of 1929
I
,.
2 s~c.R. SUPREME COURT REPORTS .
75
and the other l:)as~d.,on the provision as amended.
The former was, based on the impact of the nature
of the proce,edings under 0. 21, rr.