# PRASAD & ORS v. V. GOVINDASWAMI MUDALIAR & ORS

- **Citation:** [1982] 2 S.C.R. 109
- **Court:** Supreme Court of India
- **Decided:** 1981-12-08
- **Case number:** Civil Appeal Nos. 1102-1103 of 1970
- **Bench:** D.A. Desai, R.B. Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/prasad-ors-v-v-govindaswami-mudaliar-ors-8870
- **Pages:** 30

## Headnote

Hindu Law-Joint Hindu family-A11cestral business carried on-Karla starting a new business-Incurring debts alienation of joint family property by karta
and his brother for liquidation of debts-Alienation assailed by sons-AlienationWhether valid.
,,.,,
Hindu Law-Antecedent debt-What is-Debt whether to be antecedent in
fact as well as in time-Whether to be independent of and not part of the rransaction impeached.
Hindu Law-Alienation of joint hindu family property-Validity of alienation assailed-Legal necessity and adequate consfderation-Proof of-Whether
required.
Constitution Df India 1950, Art. !33-Findings of fact-Supreme Court-InterB
c
D
ference by-When arises.
B
The Karta of a Joint Hindu Family was in sole management of the entire
family affairs and he brought up his younger brother. The ancestral family
business (Kulachara) was that of tobacco and money lending. After sometime
the Karta started a new business of fungi. Jn connection with this new venture he
borrowed money from others either on promissory notes or on the security of the
family properties. He suffered Joss in the new business. When his creditors
began to press him for immediate discharge of the debts the Karta and his
brother on their behalf and on behalf of the other minors in the family entered
into a written agreement on 7th July, 1955 (Ext. B-4) with Govioda Swami
Mudaliar and his two brothers whereby they agreed to sell
their almost
entire property for
a sum of
Rs.
14,000 to
discharge their debts.
Pursuant to this agreement a sale deed was executed on 22nd August, 1955
(Ext. B-5) for an enhanced consideration of Rs. 16,500. The sale deed referred
to the various debts including the mortgage debts owed by the vendors which
were to be discharged by the vendees and the balance if any to be paid to the
vendors. The veodees were asked to pay off the mortgage debts mentioned in
the sale deed in the first instance if they had no sufficient funds to clear off all
the debts.
The sons of the· Karla and those of his brother filed two suits, suit No. 107
of 1958 and suit No. 108 of 1958 respectively challenging the sale deed dated 24n<l
F
G
H
A
B
c
D
E
110
SUPREME COURT REPORTS
( 1982] 2 S.C.R
August, 1955 (Ext. B-5) and the mortgage deed of 2nd March, 1952 (Ext. B-49),
and claiming partition.
In suit No. 107 of 1958 the Karta and his brother were Defendant Nos. I
and 2, the three minor sons of the Karta's brother, Defendant Nos. 3 and 5 and
the vendees Defendant Nos. 6 to 8, the mortgagee, Defendant No. 9 and the
official Receiver, Defendant No. 10. In suit No. 108 of 1958 the three minor
sons of the Karla's brother were the plaintiffs and the plaintiffs and other defendants of suit No. 107 of 1958 were impleaded as defendants.
It was alleged in the suits that the father of the plaintiffs (Karla) started a
new business of lungi which was not the ancestral busiuess of the family, and
that in connection with the new venture he borrowed large sums of money. He
sustained heavy losses, and when the mortgagees and unsecured creditors started
pressing for immediate discharge of the debts he executed first an agreement to
sell and then a registered sale deed for a nominal consideration of Rs. 16,500
which was grossly inadequate and extremely low considering the extent of the
land and the ancestral house and its market value. It was further alleged that
except the two mortgages mentioned in the sale deed the other debts shown as
consideration for the sale were false and fictitious, that the said mortgages were
paid by defendants 6 to 8 out of the standing crops, and that there was absolutely
no necessity for borrowing the large sums considering the large income from the
joint family properties.
A third suit (suit No. 4 of 1960) was filed by a creditor of the Karla and
his brother against the vendees, alleging that the Karta had borrowed a sum of
Rs. 1000 and executed a bond for that amount and that barring some payments
a substantial amount was due on account of principal

## Text

_Characters 0–39,960 of 74,549. This is a partial read: ask again with offset=39960 for what follows._

.·
-
-·
--
109
A
PRASAD & ORS.
v.
V. GOVINDASWAMI MUDALIAR & ORS.
December 8, 1981
[D.A. DESAI AND R.B. MISRA, JJ.)
Hindu Law-Joint Hindu family-A11cestral business carried on-Karla starting a new business-Incurring debts alienation of joint family property by karta
and his brother for liquidation of debts-Alienation assailed by sons-AlienationWhether valid.
,,.,,
Hindu Law-Antecedent debt-What is-Debt whether to be antecedent in
fact as well as in time-Whether to be independent of and not part of the rransaction impeached.
Hindu Law-Alienation of joint hindu family property-Validity of alienation assailed-Legal necessity and adequate consfderation-Proof of-Whether
required.
Constitution Df India 1950, Art. !33-Findings of fact-Supreme Court-InterB
c
D
ference by-When arises.
B
The Karta of a Joint Hindu Family was in sole management of the entire
family affairs and he brought up his younger brother. The ancestral family
business (Kulachara) was that of tobacco and money lending. After sometime
the Karta started a new business of fungi. Jn connection with this new venture he
borrowed money from others either on promissory notes or on the security of the
family properties. He suffered Joss in the new business. When his creditors
began to press him for immediate discharge of the debts the Karta and his
brother on their behalf and on behalf of the other minors in the family entered
into a written agreement on 7th July, 1955 (Ext. B-4) with Govioda Swami
Mudaliar and his two brothers whereby they agreed to sell
their almost
entire property for
a sum of
Rs.
14,000 to
discharge their debts.
Pursuant to this agreement a sale deed was executed on 22nd August, 1955
(Ext. B-5) for an enhanced consideration of Rs. 16,500. The sale deed referred
to the various debts including the mortgage debts owed by the vendors which
were to be discharged by the vendees and the balance if any to be paid to the
vendors. The veodees were asked to pay off the mortgage debts mentioned in
the sale deed in the first instance if they had no sufficient funds to clear off all
the debts.
The sons of the· Karla and those of his brother filed two suits, suit No. 107
of 1958 and suit No. 108 of 1958 respectively challenging the sale deed dated 24n<l
F
G
H
A
B
c
D
E
110
SUPREME COURT REPORTS
( 1982] 2 S.C.R
August, 1955 (Ext. B-5) and the mortgage deed of 2nd March, 1952 (Ext. B-49),
and claiming partition.
In suit No. 107 of 1958 the Karta and his brother were Defendant Nos. I
and 2, the three minor sons of the Karta's brother, Defendant Nos. 3 and 5 and
the vendees Defendant Nos. 6 to 8, the mortgagee, Defendant No. 9 and the
official Receiver, Defendant No. 10. In suit No. 108 of 1958 the three minor
sons of the Karla's brother were the plaintiffs and the plaintiffs and other defendants of suit No. 107 of 1958 were impleaded as defendants.
It was alleged in the suits that the father of the plaintiffs (Karla) started a
new business of lungi which was not the ancestral busiuess of the family, and
that in connection with the new venture he borrowed large sums of money. He
sustained heavy losses, and when the mortgagees and unsecured creditors started
pressing for immediate discharge of the debts he executed first an agreement to
sell and then a registered sale deed for a nominal consideration of Rs. 16,500
which was grossly inadequate and extremely low considering the extent of the
land and the ancestral house and its market value. It was further alleged that
except the two mortgages mentioned in the sale deed the other debts shown as
consideration for the sale were false and fictitious, that the said mortgages were
paid by defendants 6 to 8 out of the standing crops, and that there was absolutely
no necessity for borrowing the large sums considering the large income from the
joint family properties.
A third suit (suit No. 4 of 1960) was filed by a creditor of the Karla and
his brother against the vendees, alleging that the Karta had borrowed a sum of
Rs. 1000 and executed a bond for that amount and that barring some payments
a substantial amount was due on account of principal and interest and that the
Karla executed a sham, nominal and fraudulent sale deed in respect of the family
property in favour of the defendant with an intent to defeat and delay his creditors, and that property worth Rs. 50,000 was alienated for a nomin<al price.
The claim of the plaintiffs in the suits was resisted and contested by the
transferees, alleging that the alienation by the Karla was for payment of anteceF
dent debts which were untainted by immorality. The father under Hindu Law
possessed a special power to alienate joint family property including the shares of
his sons for payment of his own debts not incurred for immoral or illegal purposes and that in exercise of that power the Karta had sold all his interest and the
interest of the minor sons, that an agreement of sale was first entered into and
later on a sale deed was executed pursuant to the agreement for sale.
G
The trial court held that at the time of execution of the sale deed Ext. B-5,
the 4th defendant that is the Karla owed some creditors in whose favour he had
executed promissory noies and the bond debts involved in Ext. A-7 to A-11; but
no provision at all had been made for these creditors either in the agreement of
sale or in the sale deed. The letter by the Karta dated 27th July, 1954 (Ext. B-54)
alongwith other oral evidence clearly established the intention of the Karla to
H
defeat and delay the claim of some of the creditors in screening his property by a
nominal sale in favour of defendants I to 3. The sale deed is true and supported
by consideration but only partly, and that it is liable to be set aside wholly as
-
--.
..
PRASAD v. V.G. MtiDALIAR
Iii
an imprudent transaction. The mortgage deed is true and binding only so far as
the shares of the Karta and his brother are concerned. The alienees under the
sale transaction were not entitled to any equities.
On these findings, the trial Court pas,ed a preliminary decree for partition
and division after setting aside the sale tramaction the alienees being directed to
work out their own remedies. The alienation dated 2nd March, 1952 was declared binding only on the shares of the Karta and his brother to the extent of
Rs. 2,000. The Court however declined to give any relief to the alienees even in
respect of the amount actually paid by them to discharge some of the debts incurred by the Karta on the ground that the transaction had been vitiated by
fraud.
The alienees defendants preferred appeals to the High Court but the mortgagee submitted to the judgment and decree and did not prefer any appeal presumably because he could realise the amount due to him by virtue of the
decree granted to him,
The High Court reversed the findings of the trial court in suits Nos. 107
A
B
and 108 of 1958 and set aside the decrees but confirmed the finding and decree
D
in suit No. 4 of 1960, holding that the purchase of the suit land was for a
reasonable price and the consideration of Rs. 16,500 was not a grossly low price.
The lungi business started by the Karta was a new venture and not his family
business. The debts mentioned in Ext. B-5 were antecedent debts from the
point of view of the plaintiffs in suit No. 107 of 1958 and were binding on them.
The debts evidenced by Exts. B 13 and B 14 were genuine debts and the alienation, Ext. B 5 was binding on the plaintiffs in the two suits as the sale deed was
E
executed by their father in discharge of antecedent debts.
In the appeals to this Court it was contended on behalf of the appellants
that the High Court had omitted to take into consideration various circumstances considered by the trial court and as such the findings of the High Court
on material issues were vitiated, that the High Court omitted to consider whether
the impugned sale was an imprudent transaction, if not fictitious. On behalf of
the respondents it was contended that the findings recorded by the High Court
were pure findings of fact based on appraisal of evidence and this Court cannot
reverse the findings recorded by the last court on facts
Allowing the appeals
HELD : I. On the evidence both oral, documentary and circumstantial
the trial court was right in holding that the sale deed is true and that it is
supported by consideration but only in part and that even the recited considera·
tion in the sale deed is thoroughly inadequate and that the sale deed was executed only nominally for a collateral purpose and with .a view to stave off creditors. [134 DJ
2. The contention of the counsel for the respondents that finding of fact
cannot be interfered with by the Court has no force, as the finding is being
F
H
A
8
a
D
E
F
G
H
112
SUPREME COURT Rili>oR.ts
(1982.J i s.C.R.
reversed on the ground that material circumstances had been ignored by the
High Court. [134 F]
In the instant case, there is no question of giving any equities to the vendee
even if some of the amount paid by the veodee to some of the creditors of the
Karla were genuine. [134 G]
3. The finding that the consideration for the sale deed was thoroughly
inadequate, is correct and the sale therefore cannot be upheld. [138 DJ
4. In order to uphold an alienation of a joint Hindu family property by
the father or the manager it is not only necessary to prove that there was a legal
necessity but also that the father or the manager acted like a prudent man and
did not sacrifice the property for an inadequate consideration. [137 H-138 A]
Io the instant case, the Karta had contracted the debt in connection with
his new personal business and to clear all those debts he had executed the sale
deed. The debt in question was an antecedent debt so far as his sons were
concerned, and therefore, they were under a pious obligation to pay all those
debts. It was open to the father to execute a sale deed in respect of the shares
of his sons also unless it was shown that the debt was tainted with immorality or
was for an Illegal purpose. The case of the sons was not that the debt was
contracted for an illegal or immoral purpose. The sale would therefore
be binding on the sons of the Karta. With regard to the sons of the Karta's
brother, the same is however not the position. In view of the factual position
that the fungi business was the individual or private business of the Karta it
could not be said that his brother had alienated the joint family property in the
capacity as father of his sons for discharging any antecedent debt incurred by
him merely because he had also joined the Karla in executing the sale. The
share of the sons of the brother could not therefore have been alienated by the
Karta for discharging antecedent debts. [135 E-H]
5. Ext. B-54, an inland letter dated 27th July, 1954 was written by the
Karla in Telugu to Veeraswami Naidu, and is the most important document
supporting the vendors. This letter
has been relied upon by
t.he trial
Court but has been discarded by the High Court. If this letter is proved
to be genuine it gives a death blow to the case of the vendees. This
letterwhich bore postal stamps could
not
have been
fabricated.
The
observation of the High Court that it might have been written subsequently
is a conjecture. No such case was even set up by the veodees in the written
statemeut or iu the evidence. The High Court attached undue importance to
the fact that if Ext. B 54 reached the addressee on the 4th August, 1955 then
Exts. B-20 and B-48 could not have been prepared on the 30th July, 1955. The
difficulty is solved if a reference is made to the last paragraph of the letter.
The addressee was informed that they were coming to meet D.W. 12 the next
day. There was, therefore nothing improbable in the preparation of these two
documents on 30th July, 1955. [123 B-C, 126 A, 125 H, 126 B-C]
6. The observation of the High Court that there was no necessity for the
Karla and his brother to bring into existence fictitious promissory notes in favour
of D.W. 3 and D.W. 12,as they could have easily mentioned the other undisputed
..
-
...
PRASAD V. V.G. MUDALIAR
I I 3
debts owed by them to support the recital of the consideration in the sale deed,
also does not hold good because there is ample evidence on record to warrant
the conclusion that the promissory notes in favour of D.W. 3 and D.W. 12, were
fictitious. Most of the debts have neither been referred co in the deed of agreement for sale nor in the sale deed and it was purposly done. If the aforesaid
circumstances had been taken into consideration the High Court could have
had no difficulty in accepting Ext. B 54 as genuine. [126 G-127 A]
In the instant case, the new business of /ungi started by the Karla ended
in a loss. There was pressure from the creditors for the discharge of the debts.
As a prudent man, he would have liked to save his property to the extent he
possibly could and pay off the various debts incurred by him. Curiously enough
the Karta and his brother sold away the entire landed property of about 47 acres,
leaving behind only an acre, and a house, owned by the joint family for a petty
sum of Rs. 16,500.
Out of the total consideration of Rs. 16,500 the vendees
were asked to discharge the various debts. All the debts incurred by the Karta
were not shown in Ext. B-5 and Ext. B-4 the deed of agreement. [127 C-D]
7. The stipulation in the sale deed that the vendee pay off only the secured
debts and clear off the other ordinary debts at their leisure itself indicates that
A
B
c
there was no anxiety on the part of the vendors to clear off all the debts. It is
n
also not clear why the vendors should adopt such an attitude. These circumstances speak for themselves. They indicate
th~t the vendees persuaded the
Karta to execute a sale deed of almost his entire family property under the
pretext of assistance to him with the stipulation that they would re-convey the
property to the vendors after the pressure from the creditors was over. [I 28 C-E]
8(i) The legal position under the Hindu Law about the pious liability
of the sons to discharge the antecedent debts of the father is quite clear .
A natural guardian of a Hindu minor has power in the management of
his estate to mortgage or sell part thereof in case of necessity or for the
benefit of the estate. If the alienee does not prove any legal necessity or
that be does not made reasonable enquiries, the sale is invalid. But the father in
a joint Hindu Family may sell or mortgage the joint family property including
the sons' interest therein to discharge a debt contracted by him for his own
personal benefit and such alienation binds the sons provided : (a) the debt was
antecedent to the alienation, and (b) it was not incurred for any immoral purpose. (ii) "Antecedent" debt means antecedent in fact as well as in time. The
debt must be independent of and not part of the transactions impeached. The
debt may be a debt incurred m connection with a trade started by the father.
The father alone can alienate the sons' share in the case of joint family.
The
privilege of alienating the whole of joint family property for payment of an antecedent debt is a privilege only of the father, grandfather and great grandfather
qua the son or grandson only. No other person has any such privilege.
[134 H-135 B, D-E)
Sidheshwar
Mukherjee v. Bhubneshwar Prasad Narain Singh and Ors.
[1954] SCR 177 ; Brij Narain v. Mang/a Prasad and Ors. L.R. 51 I.A. 129.
Shanmukam v. Nachu Ammal A.I.R. (1937) M&d. 140; Dudh N(lt/i v, Sat Nwat11
Ram A,I.R. (1966) All. ~IS, r~f~rre\! to,
E
F
G
H
A
B
c
D
E
F
G
H
l14
SUPREME COURT RF.PORTS
[ 1982) 2 s.c.R.
The validity of an alienation made to discharge an antecedent debt rests
upon the pious duty of the son to discharge his father's debt not tainted with
immorality. [135 CJ
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1102-1103
of 1970.
Appeals by certificate
from
the judgment and Decree
dated 6th November, 1968 of the Madras High Court in A. S.
Nos. 534 of 1961 and 165 of 1962.
T.S. Krishnamurthy Tyer, Gopal Subramaniam and Mrs. Gopalakrishnan for the Appellants.
Vepa P. Sarathy, Naresh Sharma and Vineet Kumar for the
Respondents.
The Judgment of the Court was delivered by
MISRA J. The psesent appeals by
certificate are directed
against the judgment dated 6th November, 1968 of the Madras
High Court.
The dispute between the parties centres around 48. 70 acres of
land, partly wet and partly dry in village Pichanur, Gudiyattam
Taluk, North Arcot District and one house in Gudiyattam town.
Admittedly the said properties belonged to one Varadayya Chetty.
He had two sons, K. V. Purushotham and K. V. Sriramalu. K.V.
Purushotham in his turn had four sons while K.V. Sriramulu had
three sons.
They constituted a joint Hindu family.
The family
owned and possessed 48.70 acres of land and three houses. Varadayya Chetty died about 30 years prior to the institution of the
suits giving rise to these appeals. At the time of his death his eldest
son K. V. Purushotham was the only adult male member, the other
son, K.V. Sriramulu being only 4-5 years old. Purushotham thus
came into the sole management of the cntrie family affairs and he
brought up his younger brother Sriramalu. Their ancestral family
business (Kulachera) was that of tobacco and money lending.
It appears that immediately after the second world war Purushotbam started a new business of fungi.
In connection with his
new venture be borrowed money from others either on promissory
notes or on the security of the family properties. He, however, suffered Joss in that business. When his creditors began to press for imme-
-
l>RASAt> v. V.G. MtJt>ALIAR (Misra, J.)
115
diate discharge of the debts, K. V. Purushotham and his brother
K.V. Sriramalu on.their behalf and on behalf of other minors in
the family entered into an agreement on 7th July, 1955 with V.
Govindaswami Mudaliar and V. Nataraja Mudaliar, sons of Vadi·
nankuppam Venugopala Mudaliar. This agreement was evidenced
by a writing, Ext. B-4.
Under the agreement K. V. Purushotham
and K.V. Sriramulu were to sell their entire property, except one
acre of land, and a house, to Mudaliar brothers for a sum of
Rs. 14,000 to discharge their debts. They received a sum of
Rs. 500 by way of advance and the balance of Rs. 13,500 was to be
paid within two months. It was further stipulated that in case the
vendees defaulted they would Jose the advance money, on the other
hand if the vendors defaulted they would have to pay to the vendees
a liquidated damage of Rs. 2000.
Pursuant to the aforesaid agreement, a sale deed was executed
on 22nd of August, 1955 marked Ext. B-5 for an enhanced consideration of Rs. 16,500.
The sale deed referred to various debts owed
by the vendors which were to be discharged by the vendees and the
balance, if any, was to be paid to the vendors.
The recital in the
sale deed indicates that Rs. 250 was paid in cash to the vendors at
the time of the cxecu ti on of the sale deed. The sale deed further
recites that the vendors have not shown the exact amount of debts
which the vendees have agreed to pay. The amounts specified therein are only approximate. The sale deed further authorised the vendees to discharge the mortgage debts mentioned in the sale deed in
the first instance, if they had no sufficient funds to clear off all the
debts at one time and clear off the ordinary debts later.
A
B
c
n
E
The validity of the aforesaid sale deed, Ext. B-5 dated 22nd
F
August, 1955 and a mortgage deed Ext. B-49 in favour of A. M.
Vasudeva Mudaliar had been challenged by the sons of K.V. Purushotham and K.V. Sriramalu respectively by two suits: Suit No. 107
of 1958 and Suit No. I 08 of l 958.
There was yet another suit by
one of the creditors, M.V. Chinnappa Mudaliar for annulment of
the said sale.
As mentioned earlier, the original sui: No.· 107 of
G
1958 was filed by the four sons of Purushotham impleading Purushotham and Sriramulu as defendants Nos. I and 2 and three minor
sons of Sriranrnlu as defendants Nos. 3 to 5 under the guardianship
of their mother; V. Govindaswami Mudaliar, V. Shanmugha Mudaliar, and V. Nataraja Mudaliar, the three vendees as defendants
Nos. 6 to 8 in suit No. 107 of 1958 and defendants Nos. 8 to 10 in
suit No. 108 of 1958; A.M. Vasudeva Mudaliar, defendant No. 9
H
j j 6
SUPREME COURT REPORTS
(1982] 2 s.c.tt.
A
and the Official Receiver of the North Arcot District as defendant
No. IO.
B
c
D
E
F
G
H
Suit No. 108 of 1958 was filed by the three minor sons of
Sriramulu. The plaintiffs and other defendants of original suit
No. 107 of 1958 were impleaded as defendants in this suit. The
relief claimed in these suits was for partition after setting aside the
sale deed dated 22nd of August, 1955, Ext. B-5 and the mortgage
deed Ext. B-40 in favour of A.M. Vasudevan Mudaliar.
The allegations in the plaint of the two suits are on the same pattern. It
will, therefore, suffice to refer to the allegations made in suit
No. 107 of 1958.
It is alleged in the plaint that the ancestral property of the
family consisted of 48 acres and 70 cents of land and three houses
detailed in Schedules B and C to the plaint.
The said land fell
in two blocks, one consisting of 43 acres, 21 cents and the other of
5 acres 49 cents. There were two wells in the first block and one
well in"the second block. There were two pump-sets with electric
motors installed in the two wells in the first block at a cost of
Rs. 3000 each~ The net cultivation yield from the land in any
case would not be less than Rs. 6000 per year which was more
than sufficient for the maintence of the family leaving even some
surplus. The father of the plaintiffs started a new business of
fungi which was not the business 'Kulachara' of the family.
In
connection with the new venture he bad to borrow large sums of
money either on promissory notes or on the security of the aforesaid property. In course of the said business Purushotham sustained
a heavy loss.
When the mortgagees and unsecured creditors started
pressing for immediate discharge of the debts, defendants 6 to 8,
who happened to be friends of Purushotham, induced him to create
a nominal sale of the house and the entire land, except an acre, in
order to
stave off the
immediate
pressure.
Purushotbam
seemed to have fallen in with the idea and consequently executed
first an agreement to sell and then a registered sale deed dated 22nd
of August, 19 55 for a nominal consideration of Rs. 16,500 in respect of the entire land in Schedule B with electric pump sets, with
, the exception of one acre, and a house which is item No. I of
Schedule C.
Defendants 6 to 8 represented that they would execute
a formal deed of reconveyance of the properties after the pressure from
creditors was staved off.
The sale deed was not
supported
by
consideration
and
even
recited
consideration
Rs. ) 6,500 was
grossly inadequate and
extremely low consi-
...
i
-
-
PRASAD v. V.G. MUDALIAR (Misra, J.)
117
dering the
extent of land and
the house and their market
value. The entire joint family property was not worth less than
Rs. 35,000 and its annual yield was worth more than Rs. 6,000.
The house mentioned at item No. I of Schedule C was also worth
Rs. 5,000 though the consideration for the same in the sale deed
was only Rs. 2,000. Defendants 1 and 2 continued in possession
of the properties sold, for about a year when suddenly defendants
Nos. 6 to 8 conceived the idea of defrauding the defendants l and
2 and by force and violence trespassed upon the lands and took
forcible and unlawful possession thereof along with the standing
crops worth Rs. 6,000 Defendants 1 and 2 were, however, still in
possession and enjoyment of the house mentioned in item No. 1
of Schedule C.
Defendants 6 to 8 were bound to deliver
the possession of the land to the plaintiffs and defendants I to 5
together with the mesne profits from June 1956, the date of
trespass.
It was further alleged that except the two mortgages mentioned in the sale deed the other debts shown as consideration were
false and fictitious.
Even the said mortgages were paid by defen·
dants 6 to 8 out of the standing crops. There was absolutely no
necessity for borrowing the large sums considering the large income
from the joint family properties. Even if the alleged debt due on
the promissory note executed by defendant No. l in favour of the
9th defendant was true, it was not binding on the plaintiffs to the
extent of the cash consideration as it was not for necessity.
Defendant No. 2 joined the execution of sale deed and the mortgage
deed at the behest of the 1st defendant and on misrepresentations
made by defendants Nos. 6 to 8 and in fact he had not derived any
benefit from the borrowings.
As M.V. Chinnappa Mudaliar had
filed a petition against Purushotham, being insolvency petition
No. 20 of 1955, and Purushotham was adjuged insolvent so the
Official Receiver was impleaded as a defendant in this case.
The third suit being suit No. 4 of 1960 was filed by M.V.
A
B
c
D
E
F
Chinnappa Mudaliar, a creditor of defendants K.V. Purushotham
G
and K.V. Sriramulu against the vendees V. Govinda~wami Mudaliar
and his two brothers arrayed as defendants l to 3.
He first filed an
insolvency petition in which Purushotham was adjudged as insolvent. The said creditor had approached the Official Receiver for
filing a suit for the annulment of the said sale but as Official
H
Receiver demanded a lot of expenses he, therefore, sought "the permission of the Insolvency Court to file suit No. 4 of 1960 himself
A
B
c
E
F
G
H
118
SUPREME COURT REPORTS
[1982] 1 s.c.R.
for a declaration that the sale deed dated 22nd of August, 1955
executed by Purushotham in favour of vendees was void or voidable ·
at the instance of the creditors of Purushotham and for annulment
of the same. ·According to him Purushotham had borrowed a sum of
Rs. 1000 from him and had executed a bond for that amount on 17th
September, 1947 carrying interest at 13 annas per cent per mensem.
Barring some payments a snbstantial amount was still due from him
as principal and on account of interest in _the middle of 1955.
Purushotham, however, executed a sham, nominal and fradulent
sale deed dated 22nd August, 1955 in respect of almost all the
family properties in favour of the defendants Nos. 1 to 3 with an
intent to defeat and delay his creditors, including the plaintiff.
It was also pleaded that property worth Rs. 50,000 was alienated
for a nominal price obviously for discharge of fictitious debts. So,
the plaintiff claimed a relief under section 53 of the Transfer of
Property Act.
The claim of the plaintiffs in all the three suits was resisted
by the transferees.· In substance their defence was that the alienation by Purushotham was for payment of antecedent debts which
were untainted by illegality or immorality; that the father under
the Hindu Jaw possesed a special power to alienate joint family
property including the shares of his sons for payment of his own
debts not incurred for immoral or illegal purposes; that in
ex~rcise
of that power he had sold all his interest and the interest of his
minor sons, that a registered agreement of sale was entered into
on 7th of July 1955 and the period of two months was provided
for the performance of the contract and the vendees had investigated
before entering into the transaction; that the transaction was normal,
regular and bona fide one; that the vendees had in fact paid off
the full consideration applying it for discharge of antecendent debts
obtaining from several creditors vouchers for such due payment and
cancellation.
A.M. Vasudevan Mudaliar who had been arrayed
as defendant No. 9 in suit No. 107 and as defendant No. 7 in
suit
No. I 08
of 1958 resisted the claim of the plaintiffs in
those
suits
on the ground
that the mortgage in his favour
was
incurred
for
the discharge of antecede11t
debts
and
for the need of the Hindu family, which was binding upon the
members of the family.
The plaintiffs in both the suits Nos. 107
and .108 of 1958, the sons of the vendors, were bound by the said
alienation.
...
-
--
-.
..
•
PRASAD v. V.G. MUDALIAR (Misra, J,)
119
The pleadings of the parties gave rise to a number of issues.
Some of the issues were common in afl the three suits.
On the
request of the parties all the three suits were jointly tried.
Before the trial commenced a joint memo was Ii led in original
suit No. 4 of 1960 whereby the parties agreed that the evidence in
original suit No. 4 of 1960 regarding lack of consideration for
the sale deed dated 22nd of August, 1955 and the value of the pro- ·
perties, be treated as evidence in original suit Nos. 107 and 108 of
1958.
They also agreed that the evidence regarding the mortgage
deed dated 2nd of March 1952 be treated as common evidence for
original suit Nos. I 07 and I 08 of 1958
After this statement by the
counsel for the parties, the original issues framed in the three suits
were recast and additional issues were also framed.
The Subordinate Judge came to the following conclusions in
suit No. 4 of 1960:
(I) At the time of execution of the sale deed.
Ext. B-5,
the fourth defendant, that is Purushotham, owed some
creditors in whose favour he had executed Exts. A-3,
A-4, A-12, A-13 and the bond debts involved in
Exts. A-7 to A-11, but no provision had at all been
made for those creditors either in the agreement of
sale Exts. B. 4 dated 7th of July, 1955 or in Ext. B-5,
the sale deed dated 22nd of August, 1955.
(2) Ext. B-54, the letter written by Purushotham in favour
of Veerasami Naidu dated 27th of July. ! 955 a!ongwith other oral evidence clearly establishes the intention of Purushotham to defeat and delay the claim of
some of the creditors in screening his property by a
nominal sale in favour of defendants 1 to 3.
(3) The ingredients of section 53 (I) of the Transfer of
Property Act have been satisfied by the plaintiff in as
much. as impugned transfers have been made with
intent to defeat or delay the creditors of the transferor.
The Court, however, came to the conclusion
that the suit was wrongly framed inasmuch as the
plaintiff did not seek any relief on behalf of or for the
benefit of all the creditors and, therefore, the Court
decreed the suit No. 4 of 19(;i0 as a~ainst <!efendants l
A
c
0
F
A
8
c
D
E
F
G
H
120
SUPREME COURT REPORTS
(1982) 2 S.C.R
to 3, that is, alienees annulling the sale transaction
dated 22nd August, 1955 as fraudulant preference
under section 54 of the Provincial Insolvency Act,
insofar as the insolvent's share was concerned.
His conclusions in suit Nos. 107 and 108 of 1958 were as
follows:
(I) The value of the land and house including the pump
sets, wells etc. comprised in Ext. B·5 could have been
in August 1955 worth anywhere between Rs. 35,000 to
Rs. 50,000, but the same had been sold at a grossly
low and inadequate price of Rs. 16,500.
(2) Purushotham
and Sriramulu
with
the
help of
Shri Rangaswami, who was theic friend, approached
the vendees for help and on their suggestion they
agreed to execute a no min al sale of all their properties
with an understanding for reconveyance after ten years
on payment of the sums advanced by them and that
in that connection they had thought of executing the
two bogus bonds, one in favour of Veeraswami Naidu,
DW 12, and another in favour of Deivasigamani
Mudaliar, DW 3 and certain other documents to
make the sale probable.
(3) The sale dated 22nd August, 1955 is true and it is
supported by consideration but only partly. It is,
however, liable to be set aside wholly as an imprudent
transaction.
(4) The mortgage deed dated 2nd of March 1952 is true
and binding only so far as shares of K.V. Purushotham
and Sriramulu are concerned and to the extent of
Rs. 2000 so far as the plaintiffs in
original suit
No. 107 of 1958 are concerned.
(5) The alienees under the sale transaction dated 2211d of
August 1955 are not entitled to any equities in this
suit. But the alinee under Ext. B. 49 would be entitled
to have his two items of house aliotted to the share of
K.V. Purushotham and K.V. Sriramulu to work out
his equities but this will be easily done in the final
-
-
-
-
----
•
•
PRASAD v. V.G. MUDALIAR (Misra. J.)
121
decree proceedings in original suit No. 107 of 1958
A
and !08 of 1958.
(6} The plaintiffs would be entitled to past profits from the
alienees of the sale transaction dated 22nd of August,
1955 from the year 1956-57 as it is in evidence that
they entered possession in that year.
B
On these findings the Subordinate Judge passed a preliminary
decree for partition and division of their respective shares in suit
Nos. 107 of 1958 and 108 of 1958 which was 2/5th and 3/8th
respectively in both the suits after setting aside the sale transaction dated 22nd of August, 1955 and directing the alienees to work
out their remedies outside the scope of these suits and declaring
that the alienation dated 2nd March, 1952 was binding only on the
shares of K.V. Purushotham and K.V. Sriramulu and to the extent
of Rs. 2000. The plaintiffs were held entitled to a decree for past
profits from 1556-57 as against the a!ienees of the sale transaction
dated 22nd August, 1955, the quantum to be determined in a separate enquiry in the final decree proceedings as was agreed to by
the parties under Order 20, rule 12 C.P.C. The court declined to
give any relief to the alienees even in respect of the amount actually
paid by them to discharge some of the debts incurred
by
Purushotham on the ground that the transaction has been vitiated
by fraud.
The alienees-defcndants feeling aggrieved by the judgment and
decree of the Subordinate Judge preferred appeals in all the three
suits. The mortgagee Vasudevan Mudaliar, however, submitted to
the judgment and decree and did not prefer any appeal presumably
because he could realise the amont due to him by virtue of the
decree granted to him. The High Court was, therefore, concerned
only with the validity of the sale deed Ext. B-5 in favour of the
appellants.
The High Court reversed the findings of the trial court in
suits Nos. 107 and 108 of 1958 and set aside the decree passed by
the Subordinate Judge but confirmed the finding and decree in suit
No. 4 of 1960. The High Court came to the conclusion that the
purchase of the suit land under Ext. B-5 was for a reasonable price
and the consideration of Rs. 16,500 mentioned in Ext. B-5 was
not a grossly low price. The lungi business started by Purushotham
was new a venture of Purushotham and not his family business. His
father had only a tobacco and money-lending business. The genuine
c
D
E
F
G
H
A
B
c
D
F
G
H
122
SUPREME COURT REPORTS
(1982] 2 S.C.R.
debts mentioned in Ext. B-5 were antecedent debts from the point
of view of the plaintiffs in original suit No. 107 of 1958.
Therefore, they are binding on them.
As the debts evidenced by
Ext. B-I 3 and B-14 were genuine debts the alienation, Ext. B-5, is
clearly binding on the plaintiffs in original suit No. 107 of 1958
as the sale deed was executed by their father in discharge of antecedent debts.
The alienation under Ext. B-5 can be supported not
only against the plaintiffs in original suit No. 107 of 1958 but also
against the plaintiffs in original suit No. 108 of 1958 as it was made
in discharge of antecedent debts of their respective fathers.
On these findings the High Court allowed the appeals filed by
the alienees in suit Nos. 107 and 108 of 1955 but dismissed the
appeal filed in suit No. 4 of 1960.
The plaintiffs have now come in
appeal to challenge the judgment of the High Court.
The contention raised on behalf of the appellants is that the
High Court has omitted to take into consideration various circumstances which had been taken into consideration by the trial court
and as such the findings of the High Court on material issues are
vitiated.
The High Court further omitted to consider whether the
impugned sale was an imprudent transaction, if not fictitious.
The
counsel for the respondents, on the other hand has contended that
the findings recorded ,by the .High. Court are pure findings of fact
based on appraisal of evidence and this Court cannot reverse the
findings recorded by the last court of facts.
We have to consider
the findings of the High Court in the light of the contentions raised
by the parties.
The question for consideration in these appeals is about the
genuineness of the sale deed Ext. B·5 dated 22nd of August, 1955
executed by Purushotham and Sriramulu in favour of respondents
I to 3.
As stated earlier the sale deed was challenged by the
plaintiffS on grounds : (a) that it was executed only nominally for
a collateral purpose and with a view to stave off credit'1rs with the
express understanding that the properties sold would be re-conveyed
to the vendors after the pressure of the creditors had sub-dued; (b)
that even the recited consideration in the impugned sale deed was
grossly inadequate; (c) that the debts under the promissory notes
Ext. B-13 in favour of Veeraswami Naidu and Ext. B-14 in favour
of Deivasigamani Mudaliar were fictitious.
The burden squarely Jay on the vendees to prove that the .
impugned sale deed was valid and binding on the plaintiffs and
-·.
-
...
•
--
-·
PRASAD v. V.G. MUDALIAR (Misra. J.)
123
their respective shares. To discharge this burden the vendees have
A '
produced both oral and documentary evidence. The vendors
have also produced both oral and documentary evidence in support
of their case .
Before dealing with the oral evidence of the parties in detail,
it is pertinent to refer to Ext. B-54 which is the most important
document supporting the vendors. This is an inland letter dated
~7th of July, 1955 written by K.V. Purushotham in Telugu to
Veeraswami Naidu. If this letter is proved, to be genuine it will
give a death blow to the case of the vendees. This letter has been
relied upon by the trial court but has been discarded by the High
Court. As this letter is a revealing one it will be appropriate to
quote the letter in extenso.
"Gudiyattam,
27.7.55
Letter written by Gudiyattam K.V. Purushotham with
salutations to-elder brother Sri B. Veeraswami Naidu of
Mathangal village.
Here all are keeping good health with
your blessings. Please write to me. )our and your children's
welfare. 1
In respect of the debts due to the creditors by me
here, I and your son-in-law T.G. Rangaswami Naidu
went to see Vaithana Kuppam Venugopala Mudali and
his sons V. Govindaswami Mudali and brothers and
had a talk with them in respect of the debts due by me.
· They said to us that I should execute a sale deed in respect of my properties in their favour and that after the
creditors demands (troubles) subside the amount that they
would be giving us shall be repaid within a period of
10 years and that on such repayment they would reconvey
property conveyed in their favour.
As all of us have
desired I and my younger brother entered into an agreement on 7.7.1955 agreeing to execute a deed of sale in
pursu"ance of. the talk we had ..
Sale deed remai~s to be executed. In this connection
(regard) I and my younger _bro'ther both have to create
·some nominal bonds fixing up to some dates and theri set
up as though these bonds were cancelled 1 ci"n payments
B
c
D
E
F
G
ff
124
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
(1982] 2 S.C.R.
being made by those persons and that those items might be
recited in the sale deed to be
execut1~d. For resorting to
this, 'ne all decided and fixed you up as one such (person)
in whose favour bonds have to be drawn up to a fixed
date. If such bonds are drawn up in favour of respectable
persons like you and if all of us joi11 together, then the
other creditors cannot do anything. As you are a trusted
person these could be done in your favour as stated. They
have agreed to give us great help in this matter.
Further
he is a very good friend of us. If the amount to which
they are entitled to, is paid back within IO years, without
fail, then they will reconvey by way of deed of sale in
our favour.