United Industries India v. Mathai Joseph — 1984 DIGILAW 262 (KER)

JUDGMENT K. Bhaskaran, Ag. C.J. 1. The appellant is the decree holder in Summary Suit No. 845 of 1974 on the file of the Bombay High Court. The decree in the said was sent to the Sub Court, Pathanamthitta for execution. The execution proceedings are stated to be pending before that Court. It would appear that there was an attachment before judgment of the stock in trade, items of furniture, fixtures, fittings and other movables which belonged to the defendants together with the goodwill of the defendants' business carried on by them in the name of M/s. Geetha Textiles. The attachment order was sent to the Quilon District Court for execution. The attachment was effected. However, on 7-9-1974 the appellant and the judgment debtor entered into a compromise whereby the judgment debtors agreed to pay the amount due from them in instalments; and also under-took that they would not dispose of the properties mentioned in the scheduled annexed to the order of attachment before judgment dated 23rd August, 1974 (except stock in trade). On the basis of this compromise a consent decree was passed on 3-2-1975. The judgment debtors having failed to comply with the terms of the compromise, the appellant herein moved the Court in Bombay for transferring the decree to the Sub Court, Pathanamthitta for execution. Thereafter, the appellant herein filed E. P. No. 61 of 1975 before the Sub Court, Pathanamthitta. On 14-8-1975 the appellant filed an application for appointment of Receiver in respect of the immovable properties belonging to the judgment debtors. The judgment debtors entered appearance and undertook before the Court that they would not transfer the building or the immovable property which belonged to them. They also further represented that they had no intention to defeat the claims of the appellant. A settlement was arrived at and consent terms were accordingly filed in Court. The judgment debtors nevertheless, as before, failed to comply with the terms of the settlement dated 28-1-1976 filed in Court and the appellant herein filed E.P. No. 18 of 1976 before the same Court. A warrant of arrest was issued against respondent No. 5 herein and he was arrested and brought before Court. The 5th respondent herein was then released after furnishing security and he immediately filed Insolvency Petition numbered as I. P. No. 2 of 1977 and obtained an ex parte interim stay of further execution proceedings. A warrant of arrest was issued against respondent No. 5 herein and he was arrested and brought before Court. The 5th respondent herein was then released after furnishing security and he immediately filed Insolvency Petition numbered as I. P. No. 2 of 1977 and obtained an ex parte interim stay of further execution proceedings. The appellant herein entered appearance and got the interim stay granted in favour of the 4th respondent vacated. Thereafter the appellant herein filed an application for attachment of ten cents of land and the building thereon in Sy. No. 547/73 in Adoor village belonging to the judgment debtors. Attachment was effected, pursuant to the order of the Court on 6-7-1977. 2. It was in the above background that respondents 1 to 3 herein filed Claim Petition No. 217 of 1977 in E. P. No. 18 of 1976 under O.21 R.58 of the C.P.C. claiming ten cents of property and the buildings thereon in Sy. No. 547/3 of Adoor village attached in execution. It might be noted that it was this property that was attached in execution at the instance of the appellant herein pursuant to the order of the Court dated 8-7-1977. The attachment was actually effected on 21-7-1977. 3. Respondents 1 to 3 contended inter alia that one half of the attached property and the buildings was purchased by the first respondent herein on 15-4-1977 as per document No. 1169, and the remaining half of the property and the building thereon was purchased by the 2nd claimant herein on the same day as per document No. 1170 for a total consideration of Rs. 76,000/-. Respondents 1 and 2 further contended that ever since the date of purchase, they were in possession and enjoyment of the land and the buildings thereon. It was contended by them that when the order of attachment was made, the judgment debtors (Respondents 4 to 6) had no subsisting title over the property. They also stated that they were not aware of the money decree obtained by the appellant against respondents 4 to 6 and that they had purchased the property bona fide, and the same was not calculated to defeat or defraud the creditors. According to them, they had paid sufficient consideration and the sale deeds were neither benami nor sham documents. They also stated that they were not aware of the money decree obtained by the appellant against respondents 4 to 6 and that they had purchased the property bona fide, and the same was not calculated to defeat or defraud the creditors. According to them, they had paid sufficient consideration and the sale deeds were neither benami nor sham documents. It was also contended that they came to know of the decree and the execution proceedings only on 4-8-1977 and the father of the Ist respondent, who was looking after their affairs, came to know about it only on 22-7-1977. Though the appellant herein contended that the sale deeds Exts. X2 and X3 were only pretended sale deeds, not to pass any title to the purchaser, and even if they were real transactions supported by considerations they were vitiated by fraud, and therefore, were voidable at the instance of the creditors. It was further contended by the appellant that respondents 1 and 2 purchased the property with full knowledge of the execution proceedings pending against respondents 4 to 6 (judgment debtors) and the 3rd respondent (the power-of-attorney holder of respondents 1 and 2), who purchased the property on behalf of respondents 1 and 2, was a neighbour of the judgment debtors, at the time of sale and the execution proceedings pending against the judgment debtors, and this was widely known to the people in the locality and it could not be said by any stretch of imagination that the claimants were unaware of the execution proceedings pending against the judgment debtors. 4. The execution Court on consideration of the materials placed before it found that there was much force in the contention of the decree holder that the transfer was effected with the intention to defeat the creditor. However, the Court below found that the claimants have purchased the property and the building in good faith and for sufficient consideration and accordingly allowed the claim by order dated 24-8-1978. This appeal is directed against the said order of the Court below allowing the claim petition submitted by respondents 1 and 2. 5. However, the Court below found that the claimants have purchased the property and the building in good faith and for sufficient consideration and accordingly allowed the claim by order dated 24-8-1978. This appeal is directed against the said order of the Court below allowing the claim petition submitted by respondents 1 and 2. 5. Shri O. V. Radhakrishnan, the counsel for the appellant, submitted that the order impugned in the appeal is liable to be set aside, for, it has been passed by the Court below in violation of the provisions contained S.52 and 53 of the Transfer of Property Act (the Act). What S.52 of the Act lays down is: "During the pendency in any Court having authority within the limits of India excluding the State of Jammu & Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the right of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose." The explanation to the section lays down: "For the purpose of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in *a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force." One of the ingredients for attracting the doctrine of lis pendens embodied in S.52 of the Act is that any right to the immovable property in question should be directly and specifically involved in any suit or proceeding which was pending. The appellant has no case that any right to the property purchased by respondents 1 and 2 under Exts. X1 to X3 was directly or specifically in issue in the suit. The appellant has no case that any right to the property purchased by respondents 1 and 2 under Exts. X1 to X3 was directly or specifically in issue in the suit. For that reason alone, the plea of lis pendens by the appellant decree holder has to be rejected; and we do so. 6. We would now pass on to the contention raised with reference to S.43 of the Act. Sub-section (1) of S.53 reads: "Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration." 7. In this case, it is crystal clear that the judgment debtors who compromised the matter and entered into an agreement which was filed in Court undertaking not to transfer the properties belonging to them and to discharge the decree amount by making instalment payment of Rs. 1500/-, per month, acted with intent to defeat the decree holder who was made to believe even as late as on 4-1-1977 that the judgment debtors were proposing to sell the property with a view to discharge the liability. After the sale of the property, what the judgement debtors did was to file an insolvency petition. In this case the conduct of the judgment debtors is relevant to the extent of deciding the question as to whether respondents 1 and 2, who are the vendees under Exts. X2 and X3 sale deeds acted in good faith and purchased the property for consideration. 8. Shri Radhakrishnan relied on the decision of the Supreme Court in Abdul Shukoor v. Arpi Papa Rao ( AIR 1963 SC 1150 ) and argued that in a case where it is found that the decree holder acted with intent to defeat or defraud the creditor, the burden to prove that the vendee purchased the property in good faith and for sufficient consideration is on the transferee. The observations of the Supreme Court, relied on reads as follows: "Where fraud on the part of the transferor is established 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 not 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 the transfer was in the ordinary and normal course of business." 9. There could therefore be no doubt that where it is established that the judgment debtor transferred the immovable property with intent to defeat or defraud his creditors it is for the transferee to prove that he purchased the property for sufficient consideration and in good faith, without being aware of the deceitful intentions of the Vendor (debtor). It is equally clear that in the light of the clear wording of the section, and the indications given in the decision of the Supreme Court that where it is established that in transferring the immovable property the judgment debtor acted with intent to defeat or defraud the creditors, the burden of proving that he purchased the property without being aware of the designs of the judgment debtor and in good faith for adequate consideration shifts to the transferee. In the light of this well settled principle, let us now examine whether the respondents 1 and 2 have discharged their burden. Ext. X4 is an advertisement in the Malayala Manorama newspaper dated 3-1-1977 advertising the proposed sale of the property in question. Having come to know about it, the respondents who were in a foreign country got respondent No. 3, who is the power-of-attorney holder of the respondent, negotiated for the purchase of the property. Exts. X2 and X3 are each for a consideration of Rs.38,000 each. There is no case that this consideration is not adequate. Ext. X5 is the certificate of encumbrance obtained by the 3rd respondent on 31-3-1977 long before 15-4-1977 on which date the sale were executed. Ext. 6 is the sale deed dated 18-6-1973 in favour of the 2nd judgment debtor. X2 and X3 are each for a consideration of Rs.38,000 each. There is no case that this consideration is not adequate. Ext. X5 is the certificate of encumbrance obtained by the 3rd respondent on 31-3-1977 long before 15-4-1977 on which date the sale were executed. Ext. 6 is the sale deed dated 18-6-1973 in favour of the 2nd judgment debtor. It is, therefore, evident that 3rd respondent, the power-of-attorney holder of the first respondent had taken care to obtain and scrutinise the encumbrance certificate and also to examine the title deed in favour of the Vendor. It is after ensuring that the amount as per the compromise decree in O.S. No. 845 of 1974 has been discharged that on 7-4-1977 the agreement pursuant to which the sales were entered into. Exts. X9, X10, X11, X11(a) and X11(b) are all documents to show that very much care was taken by the 3rd respondent to ensure that all the known liabilities were discharged before they paid the balance consideration and got the documents executed. Ext. X12 also shows the attachment over the property obtained by the Tax Officer was vacated. Ext. X13 pass book issued in the name of the Ist respondent by the State Bank of Travancore shows that the Ist respondent had sufficient money to pay the consideration and as a matter of fact before paying the balance amount at the time of registration on 15-4-1977 various sums were paid by issue of cheques to enable the vendor to discharge the liabilities. It would appear that all possible precautions were taken by respondents 1 and 2 to ensure that they would be able to enjoy the property without any encumbrance and it was in spite of all these measures taken by them that they were ultimately driven to the Court. When the property was sought to be attached in execution of the decree obtained by the appellant, they necessarily had to prefer a claim petition; and that was rightly allowed by the Court below after having considered all the aspects of the matter in minute detail. 10. Unless the case in the decision reported in Abdul Shukoor v. Arji Papa Rao ( AIR 1963 SC 1150 ); the vendor and vendees do not belong to the same community; and there is no evidence also show that they were well acquainted with each other. 10. Unless the case in the decision reported in Abdul Shukoor v. Arji Papa Rao ( AIR 1963 SC 1150 ); the vendor and vendees do not belong to the same community; and there is no evidence also show that they were well acquainted with each other. As a matter of fact, during the material time the vendees were abroad and it is only in response to the advertisement Ext. X4 that they, with a view to purchase some land in the home town, took the trouble of negotiating through the 3rd respondent for purchase of the property in question. There is absolutely no evidence to show that either respondents 1 and 2 were aware of the decree obtained by the appellant or the undertakings given by the judgment debtors. The purchase by respondent 1 and 2 not having been with deceitful intentions, to defraud the creditors, there is no substance in the argument put forward by the appellant. The result, therefore, is that the appeal fails and is dismissed, in the circumstances, without any order as to costs. Immediately after the judgment was pronounced, the counsel for the appellant made an oral request that leave may be granted for appeal to the Supreme Court. We do not find any substantial question of law of general importance which requires to be decided by the Supreme Court to be involved in this case; hence leave requested for is declined.