Pinna Thevar v. 1. M.S.Maniam2. S.Jayaseelan

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 01.08.2006CORAMTHE HONOURABLE MR. JUSTICE M.JEYAPAULC.M.S.A. NO. 13 OF 2006ANDC.M.P. NO. 5467 OF 2006Pinna Thevar.. Appellant/3rd Party - Vs -1. M.S.Maniam2. S.Jayaseelan.. Respondents/Plaintiff and DefendantFor Appellant: Mr. R.SubramanianFor Respondents: Mr. Srinath Sridevan for R-1 No Appearance for R-2Appeal filed against the judgment and decree dated 31.1.2006 inC.M.A. No.13 of 2005 on the file of the District Court, Nagapattinamagainst the order dated 5.7.2005 made in E.A. No.70 of 2004 on thefile of the Addl. Sub Court, Nagapattinam, as stated therein.ORDERThe appellant herein filed an application in his capacity asthird-party in E.A. No.70/04 in E.P. No.108/04 in O.S. No.159/03under Order XXI Rule 58 and Order XXXVIII Rule 8 of the Code of CivilProcedure to remove the attachment made in the suit property. Thesaid petition was dismissed by the Execution Court as against whichC.M.A. No.13/05 was preferred before the District Judge,Nagapattinam. A concurrent verdict was recorded by the appellateJudge in C.M.A. No.13/05. The petitioner herein, who is a third-party to the trial proceedings and has lost his plea to raise theattachment, both before the trial court as well as before theappellate court, has come forward with the present appeal.2. The suit was filed by the first respondent herein as againstthe 2nd respondent on 21.10.03 for recovery of a pro-note debt fromthe 2nd respondent. On the very same day, notice was ordered in I.A.No.421/03 in O.S. No.159/03 directing the 2nd respondent to furnish https://hcservices.ecourts.gov.in/hcservices/ security for the said amount. As the 2nd respondent did not furnishany security, an order of attachment was made on 14.11.03 and theorder of attachment was effected on 25.11.03. Thereafter, the suitwas decreed in favour of the first respondent. Based on such decreeobtained by the first respondent, E.P. No.108/04 was laid by thefirst respondent against the 2nd respondent.3. The appellant, who is a third-party, filed an application toraise the attachment on the ground that he having entered into anagreement for sale way back on 5.11.02, clinched the sale transactionby way of a sale deed dated 21.10.03 in respect of the suit property.The order of attachment effected on 25.11.03, well after theexecution of the sale deed in favour of the appellant based on theagreement for sale dated 5.11.02, will not bind the appellant.Therefore, the appellant has prayed for raising the attachment made,subsequent to his purchase, in the suit in O.S. No.159/03.4. The execution court having observed that the very sale deed,Ex.P-1, alleged to have been executed on 21.10.03 based on the shamand nominal agreement for sale dated 5.11.02 has been created onlyfor the purpose of defrauding the first respondent, who is thecreditor of the 2nd respondent, refused to raise the attachmentordered in the suit.5. The appellate Judge, having adverted to the provision underSection 64 of the Code of Civil Procedure and the alleged sham andnominal transaction of the 2nd respondent with the appellant,confirmed the order passed by the execution court.6. Learned counsel for the appellant would submit that inasmuchas the sale deed itself was executed long prior to the order ofattachment effected by the trial court in O.S. No.159/03, the saidorder does not bind the appellant, who is the purchaser of theproperty for valuable consideration from the 2nd respondent.Therefore, the attachment made subsequent to the sale effected infavour of the appellant will have to be raised.7. Learned counsel for the first respondent would submit thatthe whole sale transaction in favour of the appellant by the 2ndrespondent is void inasmuch as the appellant and the 2nd respondenthad clinched the deal in order to defeat the interest of the firstrespondent, who is the creditor in the case. Referring to Section 53of the Transfer of Property Act, 1882 and Order XXI Rule 58 (2) ofthe Code of Civil Procedure, learned counsel for the first respondentwould submit that the sham and nominal sale transaction fraudulentlymade will have to be avoided.8. Section 64 of the Code of Civil Procedure reads as follows :-"S.64 (1) Where an attachment has been made, any https://hcservices.ecourts.gov.in/hcservices/ private transfer or delivery of the property attachedor of any interest therein and any payment to thejudgment-debtor of any debt, dividend or other moniescontrary to such attachment, shall be void as againstall claims enforceable under the attachment."9. Section 64 of the Code of Civil Procedure will apply only ina case where the attachment has been made prior to the sale of theproperty to a third-party. Here, in this case, it is found that thesale deed was executed on 21.10.03 and the same was registered on27.10.03 whereas the order of attachment was passed on 14.11.03 andthe same was effected only on 25.11.03. As the sale deed has alreadybeen executed and the same was registered long prior to the order ofattachment, Section 64 of the Code of Civil Procedure will not applyto the facts and circumstances of this case.10. The Court has to find whether Section 53 of the Transfer ofProperty Act, which reads as follows, would apply to the facts andcircumstances of the case :-"53. Fraudulent transfer – (1) Every transfer ofimmovable property made with intent to defeat ordelay the creditors of the transferor shall bevoidable at the option of any creditor so defeated ordelayed.Nothing in this sub-section shall impair therights of a transferee in good faith and forconsideration.Nothing in this sub-section shall affect any lawfor the time being in force relating to insolvency.A suit instituted by a creditor (which termincludes a decree-holder whether he has or has notapplied for execution of his decree) to avoid atransfer on the ground that it has been made withintent to defeat or delay the creditors of thetransfer or shall be instituted on behalf of, or forthe benefit of, all the creditors.(2) Every transfer of immovable property made withoutconsideration with intent to defraud a subsequenttransferee shall be voidable at the option of suchtransferee.For the purposes of this sub-section, no transfermade without consideration shall be deemed to havebeen made with intent to defraud by reason only thata subsequent transfer for consideration was made."11. In the light of the aforesaid provision of law found in theTransfer of Property Act, the question that arises for considerationis whether the sole creditor whose interest was defeated can invoke https://hcservices.ecourts.gov.in/hcservices/ the provision under Section 53 of the Transfer of Property Act tochallenge the transfer effected by the judgment-debtor in favour of athird-party.12. Way back in the year 1930, this Court has held in (Pakkiri)Mohideen Tharangan & Another – Vs – Muhammad Mustappah Rowther &Others reported in AIR 1930 Madras 665 that even if there is only onecreditor, the act of the debtor in transferring his properties to astranger with a view to secrete the same and defeat the creditorwould be fraudulent and the transfer could be set aside if thetransferee had notice of the circumstances and of the debtor's evildesign.13. In the instant case, the agreement for sale entered intobetween the appellant and the 2nd respondent, the power of attorneyexecuted by the 2nd respondent in favour of the appellant to sell awaythe property after payment of material part of the consideration andthe sale deed executed on the very day of the filing of the suit havebeen produced to show that even before the attachment was effected bythe first respondent, the property of the 2nd respondent had been soldfor valid consideration to the appellant herein.14. Unless there is concrete evidence to the contra, we cannotpresume that the 2nd respondent and the appellant would have come toknow of the institution of the suit on the very day it has beenpresented before the court. When the execution of the sale deed andthe institution of the suit have synchronised, the court has topresume that the appellant, even before coming to know of theinstitution of the suit by the first respondent against the 2ndrespondent has clinched the deal with the appellant.15. Even if the registration of the sale deed has beenpostponed, the registration of the document clothes sanctity on thesale deed from the date on which it has been executed. TheHonourable Supreme Court in Hamda Ammal – Vs – Avadiappa Pathar & 3others reported in 1991 (1) SCC 715 :: 1991 (2) LW 110 hasauthoritatively held that even if the sale deed was executed prior tothe institution of the suit and the registration of the same hadtaken place long after the suit was instituted, the sale deed comesinto operation from the very date of its execution, the moment thesame was registered within four months from the date of its executionas contemplated under Section 23 read with Section 47 of theRegistration Act.16. The registration of the sale deed had taken place, in theinstant case, long prior to the attachment being effected by thefirst respondent against the property of the 2nd respondent. As perthe aforesaid authority pronounced by the Hon'ble Supreme Court, thesale deed executed and subsequently registered by the 2nd respondent https://hcservices.ecourts.gov.in/hcservices/ in favour of the appellant has come into operation on the date whenthe suit was laid.17. Though the learned single Judge of this Court in (Pakkiri)Mohideen Tharangan's case cited supra has held that even if theinterest of one creditor has been defeated, he could approach thecourt under Section 53 of the Transfer of Property Act, the same hasnot been found as a good law by a Division Bench of this Courtpronounced in M/s.Maxhemeijer Jr. (India) Private Limited – Vs –Zainub Bi reported in 1974 (1) MLJ 455. Interpreting Section 53 ofthe Transfer of Property Act, it has been held by the Bench thus :-"3. ....... It should be noticed that the sectionuses the words "to defeat or delay the creditors" andnot "to defeat or delay the creditor". Consequently,in a suit instituted under Section 53 of the Act, theplaintiff must plead and prove that the transferwhich is impugned by the plaintiff was effected withthe intention to defeat or delay the creditors of thetransferor generally and not to defeat or delay thisparticular creditor or that particular creditor. Thefraud, for the purpose of this section consists ofthe intention to defeat or delay the creditors of thetransferors. An intent to defeat or delay thecreditors as a whole in the enforcement of this rightis what is regarded as a fraudulent intent under thissection. This requirement of the section is easilyunderstandable, because the normal rule is, anyperson is entitled to deal with his property in anyway he pleases and the restriction imposed on thesaid power of alienation is only by way of equity infavour of other persons and one such equity is thatwhich is recognised in favour of the creditors of thetransferor. The right of the creditors, taken aswhole, is that the entire assets of the debtor shouldbe applied in payment of demands of them or some ofthem, without any portion of it being parted with,without consideration or reserved or retained by thedebtor to their prejudice. The test, therefore, tosee whether a particular transfer falls within thescope of the section or not is whether the debtorintended to prejudice the creditors as a whole byparting with his property without consideration or bysecuring or reserving a benefit to himself."Thus it is clear from the above said pronouncement of the DivisionBench of this Court, one of the material ingredients to invoke theprovision of Section 53 of the Transfer of Property Act is that nosuit could be laid by a creditor whose interest alone has been https://hcservices.ecourts.gov.in/hcservices/ defeated under Section 53 of the Transfer of Property Act to avoid atransfer on the ground mentioned in the section, but one of thecreditors whose interest was defeated or delayed alone could file asuit. So plurality of creditors should have been affected to invokethe provision of Section 53 of the said Act.18. The Division Bench judgment of our High Court has beensubsequently followed by a learned single Judge of our High Court inP.Srinivasan – Vs – Suseelabai & Others reported in 1991 (2) LW 169,wherein it has been clarified that the primary requisite to invokethe provision under Section 53 of the Transfer of Property Act isthat the impugned transfer should be to delay or defeat the generalbody of creditors and not an individual creditor. It has beenfurther clarified that in the absence of any plea that there weremore than one creditor, then Section 53 of the Transfer of PropertyAct cannot be legally invoked.19. Of course, way back in the year 1917, the Patna High Courtin Fakira Singh – Vs – Majho Singh & Another reported in AIR 1917Patna 448 held that Section 53 applies even though only one creditoris defrauded and hindered in realising his debt. The aforesaidauthority is quite in consonance with the pronouncement of thelearned single Judge of our High Court in (Pakkiri) MohideenTharangan's case. But when the march of law has been well pronouncedby the judgment of the Division Bench of our High Court and the samehas been followed subsequently by a learned single Judge, the saidlaw will have to be followed in letter and spirit.20. The Honourable Supreme Court has observed, referring to theattachment before judgment made under Order XXXVIII Rule 5 of theCode of Civil Procedure, in Hamda Ammal – Vs – Avadiappa Pathar & 3others reported in 1991 (1) SCC 715 :: 1991 (2) LW 110 as follows :-"2. ..... The above provision itself makes it clearthat the attachment before judgment would be madewhere the court is satisfied that the defendant isabout to dispose of the whole or any part of hisproperty or is about to remove the whole or any partof his property from the local limits of thejurisdiction of court with the intention to obstructor delay the execution of any decree that may bepassed against him. Thus this provision would notapply where the sale deed has already been executedby the defendant in favour of a third person. Atransaction of sale having already taken place evenprior to the institution of a suit cannot be said tohave been made with the intention to obstruct ordelay the execution of any decree. It would be a https://hcservices.ecourts.gov.in/hcservices/ different case altogether if a creditor wants toassail such transfer by sale under Section 53 of theTransfer of Property Act, 1882 (hereinafter referredto as 'the Act') on the ground of a fraudulenttransfer. Such suit would be decided on totallydifferent considerations in accordance with theprovisions of Section 53 of the Act."21. A passing reference is found in the aforesaid authority thatthe position would be totally different if a creditor chooses toattack the alleged fraudulent transfer by sale under Section 53 ofthe Transfer of Property Act, 1882. The issue whether one and theonly creditor could invoke the provision under Section 53 of theTransfer of Property Act has not arisen in the said case and,therefore, no answer thereof has also emerged in the aforesaidpronouncement by the Supreme Court. Taking advantage of such apassing reference found in the said judgment of the Supreme Court,the first respondent cannot validly to submit that the HonourableSupreme Court has laid down the law that one and the only creditor,in the absence of any other creditors, could very well seek recourseto Section 53 of the Transfer of Property Act.22. Section 53 of the Transfer of Property Act has become scarceto the first respondent. He can no more avail the said provision oflaw in the absence of any other creditors as contemplated underSection 53 of the said Act. Inasmuch as the sale deed has beeneffected even before the attachment before judgment was effected bythe first respondent in respect of the property of the 2nd respondentand the first respondent being the only creditor in the absence ofany other creditors as contemplated under Section 53 of the Transferof Property Act cannot attack the transfer on valid grounds, theclaim made by the appellant herein for raising the attachment isfound to be fully justified and merits acceptance by this Court.23. The execution court as well as the first appellate courthave not applied their mind to the law laid down by this Court and,hence, the order of the first appellate court affirming the orderpassed by the trial court has to be set aside. 24. In result, this appeal is allowed and the order passed bythe first appellate court in C.M.A. No.13 of 2005 affirming the order https://hcservices.ecourts.gov.in/hcservices/ of the Sub Court, Nagapattinam, made in E.A. No.70 of 2004 is setaside. Consequently, connected miscellaneous petition is closed.However, there will be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrar GLNTo1.The District Judge, Nagapattinam.2.The Addl. Subordinate Judge,Nagapattinam.+1cc to Mr.Srinath Sridevan,Advocate Sr 34291+1cc R.Subramanian, Advocate Sr 34341TEJ (CO)km/28.8. C.M.S.A. NO. 13 OF 2006