lyyunni v. Anto — 1994 DIGILAW 59 (KER)

Judgment :- Viswanatha Iyer, J. A.S.No. 227 of 1985 arises out of the judgment and the decree in O.S.No. 191 of 1981 on the file of the Subordinate Judge of Thrissur. We shall state the facts therein as the other two appeals actually follow in the wake of this decision. We shall refer to the parties in-the further discussion, as they are arrayed in the trial court in the suit O.S.No. 191 of 1981, for the purpose of convenience. 2. A.S.No. 227 of 1985: Defendants 2 to 4 are the appellants. They are the children of one Mannai alias Mary, the first defendant. The four plaintiffs, namely respondents 1 to 4 are the contesting parties to this appeal. The other respondents in the appeal are Mannai alias Mary, her another son, who was the third defendant and the South Indian Bank Limited, Thrissur who was the fifth defendant in the suit. 3. The suit was one under S.53 of the Transfer of Property Act, 1882 for a declaration that the deed of sale Ext. A9 (original of which is Ex(.B2) dated 5-10-1973 executed by the first defendant in favour of her three sons, defendants 2 to 4 was one executed with intent to defeat and delay the creditors of the first defendant and for other consequential reliefs. The four plaintiffs and their predecessor one Devassy had filed different suits O.S.Nos. 74 and 87 of 1972, 64,114 and 194 of 1973 against one St. Joseph's Trading Company and its partners, including the first defendant herein for recovery of amounts due to them. The first defendant was the sixth defendant in all those suits. The first suit by Devassy, namely O.S.No. 74 of 1972 was filed on 23-5-1972 in which he attached the suit properties herein which belonged to the first defendant on 25-5-1972. It was while the attachment was in force that the property which had an extent of 1.09 acres was sold by the first defendant to defendants 2 to 4 by Ext. B2 dated 5-10-1973 for a consideration of Rs. 12000/- of which Rs. 750/- was paid in cash, and the balance was reserved with the vendees for payment to the decree holder in O.S.No. 74 of 1972, and in case the amount was not payable, for payment to the first defendant herself. The other four suits by the plaintiffs herein followed, but without any order of attachment. 12000/- of which Rs. 750/- was paid in cash, and the balance was reserved with the vendees for payment to the decree holder in O.S.No. 74 of 1972, and in case the amount was not payable, for payment to the first defendant herself. The other four suits by the plaintiffs herein followed, but without any order of attachment. All these suits were tried jointly and decreed on January 3, 1978. 4. Two other suits O.S. Nos. 3 and 4 of 1973 had been filed by the 5th defendant South Indian Bank Ltd., against the same firm and its partners for recovery of amounts due to them. Those suits were also decreed. 5. The decree in O.S.No. 74 of 1972 was put in execution. The suit property was sold and purchased by Devassy, the decree holder himself for Rs. 30000/- on 17-12-1980. Before thesale was confirmed, defendants 2 and 4 filed E.A.No. 36 of 1981 under Order 21 Rule 89 of the C.P.C, to set aside the sale after depositing the decree amount due to Devassy under the decree, and poundage. These defendants claimed right to the property under the deed of sale Ext. B2. The petition was allowed by the order Ext. AS dated 18-2-1981 and the sale set aside. 6. The plaintiffs who were the decree holders in the other four suits, namely O.S.Nos. 87 of 1972 and others could not however proceed against the property for realisation of their dues in view of the sale to defendants 2 to 4 by Ext. B2 on 5-10-1973. According to them, they came to know about the sale when they took out execution of the respective decrees and the sale in question was put forward as a defence early in January 1981. Thereupon they filed the present suit O.S.No. 191 of 1981 on April 10, 1981 alleging that the sale was a fraudulent one intended to defeat and delay the creditors of the first defendant who was also liable under the various decrees as a partner of the St.Joseph's Trading Company. 7. The first defendant in a written statement of her own contested the suit with the plea that the sale was for adequate consideration for the purpose of satisfying the decree, if any, that may be passed in O.S.No. 74 of 1972. 7. The first defendant in a written statement of her own contested the suit with the plea that the sale was for adequate consideration for the purpose of satisfying the decree, if any, that may be passed in O.S.No. 74 of 1972. The sale, according to her, was a bona fide one, intended to satisfy the decree in O.S.No. 74 of 1972. She also contended that the suit was barred by limitation as it had been filed more than three years after the date of the sale, namely 5-10-1973. 8. Defendants 2 to 4 in their separate written statements contended likewise and sought dismissal of the suit. 9. The fifth defendant South Indian Bank supported the plaintiffs. They had taken steps to execute a decree in O.S.No.3 of 1973 when defendants 2 to 4 herein filed a claim E. A.No. 85 of 1981 putting forth the sale Ext. B2 in their favour and contending that the suit property was not liable to be proceeded against for realisation of the amounts due from St. Joseph's Trading Company or the first defendant. 10. After trial, the suit O.S.No.191 of 1981 was decreed on January 14,1985. The 'lower court held that the transaction in question by which the only property owned and possessed by the first defendant was sold, was in fraud of creditors, and therefore void under S.53 of the Transfer of Property Act, 1882. The lower court also held that the suit was not barred by limitation in as much as it had been filed within a period of three years from the date on which the plaintiffs had knowledge of the sale. The suit was accordingly decreed as prayed for with costs. Defendants 2 and 4 have filed the appeal A.S.No. 227 of 1985 impleading the plaintiffs and the other defendants in the suit as respondents. 11. Consequent on this judgment and decree, the claim petition E.A.No. 85 of 1981 filed by defendants 2 to 4 was dismissed with costs. Defendants 2 and 4 have filed the appeal E.F.A.No. 5 of 1985 impleading the decree holder South Indian Bank Ltd., transferor Mannai alias Mary and the third defendant as respondents thereto. 12. On the filing of O.S.No.191 of 1981, the plaintiffs had sought for and obtained an order of attachment of the suit property. Defendants 2 and 4 have filed the appeal E.F.A.No. 5 of 1985 impleading the decree holder South Indian Bank Ltd., transferor Mannai alias Mary and the third defendant as respondents thereto. 12. On the filing of O.S.No.191 of 1981, the plaintiffs had sought for and obtained an order of attachment of the suit property. After the suit was decreed and the claim petition of defendants 2 to 4 was dismissed, the South Indian Bank proceeded with the execution of the decree and the property was sold on 15-2-1986 and purchased by one Rosily, the wife of the second defendant for a price of Rs. 1.05 lakhs. The plaintiffs who had no notice of the execution proceedings filed the application E.A.No.156 of 1986 to set aside the sale under 0.21 R.90 of the C.P.C. on the ground that it was vitiated by fraud and irregularity. According to them the property was worth about Rs. three lakhs, that it had been sold only for Rs. 1,05,100/- and that such a low price was fetched only because of the fraud and collusion between the parties. Inter alia, they pointed out that the sale proclamation did not mention about the attachment which they had obtained in O.S.No.191 of 1981, and therefore the sale had proceeded as if there was no encumbrance on the property. This, they stated, was a material irregularity in the conduct of the sale, which vitiated it. 13. The lower court accepted this contention and set aside the sale. Since the plaintiffs had expressed their willingness to pay the amount of the decree due to the South Indian Bank, the lower court permitted them to do so within one month. This order dated 25th September, 1986 setting aside the sale is challenged by Rosily the auction purchaser by filing C.M.A.Nc.210 of 1986. It is in these circumstances that the three appeals are before us. 14. We may deal with C.M.A. No. 210 of 1986 in the first instance in as much as any decision therein adverse to the plaintiffs will have the effect of rendering O.S.No.191 of 1981 and the appeal there from A.S.No. 227 of 1985 virtually in fructuous. It is in these circumstances that the three appeals are before us. 14. We may deal with C.M.A. No. 210 of 1986 in the first instance in as much as any decision therein adverse to the plaintiffs will have the effect of rendering O.S.No.191 of 1981 and the appeal there from A.S.No. 227 of 1985 virtually in fructuous. As mentioned earlier, we shall be referring to the parties with reference to their array in the suit O.S.No.191 of 1981, as done by us in the earlier part of this judgment, referring to the appellant in the Civil Miscellaneous Appeal as the auction purchaser. 15. The lower court has allowed the application for setting aside the sale for two reasons, firstly on the ground that the non-mention of the attachment in O.S.No.191 of 1981 in the sale proclamation vitiated it as a material irregularity, and secondly on the ground that the property worth about Rs.three lakhs has been sold for a low amount of Rs. 1,05,100/-. So far as the latter aspect is concerned, it has to be mentioned that apart from the assertion that the value of the property will be about Rs. three lakhs, there is no evidence on record to show that its price would have been that much at the time of the sale. No commission was issued, and no evidence was tendered about the value of the property. We have only the ipsi dixit of the plaintiffs that the value of the property would be Rs. three lakhs and that the price of Rs. 1,05,100/- fetched at the sale was grossly low. Apart from this circumstance, it must also be mentioned that mere inadequacy of the price is not a ground for setting aside a court sale, unless it had been caused by the fraud or irregularity in the publishing and conduct of the sale. We are not therefore quite impressed with the second ground stated by the lower court, of inadequacy of the price fetched at the sale, particularly in the absence of any finding that the alleged low price was related to any fraud or irregularity of the nature mentioned in 0.21 R.90 of the C.P.C. 16. We shall now consider the other ground relied on by the lower court, namely that the non-mention of the attachment in O.S.No.191 of 1981 in the proclamation of sale is a material irregularity vitiating the sale. We shall now consider the other ground relied on by the lower court, namely that the non-mention of the attachment in O.S.No.191 of 1981 in the proclamation of sale is a material irregularity vitiating the sale. There is no dispute that the attachment was not mentioned in the proclamation of sale. But then, Smt.Elizabeth Mathaildiculla, counsel for the appellant auction purchaser submits that it was not one of those particulars required by 0.21 R.66(2) to be mentioned in the proclamation of sale, and that, in any event, the non-mention thereof has not caused any substantial injury to the plaintiffs justifying the sale being set aside under 0.21 R.90 of the C.P.C. In particular, she points out that while clause (c) of sub-rule (2) of R.66 requires any encumbrance to which the property is liable to be specified, the rule does not insist on particulars of attachments to be mentioned. She submits that even clause (e) of the sub-rule does not import such a requirement, the existence or otherwise of an attachment, having no effect on the nature or value of the property. She refers to the decisions in Ayya v.Parasmal 1982 (1) Karnataka Law Journal 130. Durga Prasad Shraff v. Mahadeb Lal Singhania, AIR 1937 Patna 50 and Thiruvenkita Reddiar v. Noordeen, 1977 KLT 877 in support of her submissions. 17. in Durga Prasad Shraff v. Mahadeb Lai Singhania, AIR 1937 Patna 50 a Division Bench of the Patna High Court noted that an attachment does not create any title; and that it is not an encumbrance or a charge on the property liable to be specified in the proclamation of sale under Order 21 R.66(2). Its non-mention in the proclamation is not therefore a material irregularity vitiating the sale. The same view was taken in Ayya's case, 1982 (1) Karnataka Law Journal 130. 18. We are in agreement with the aforesaid view. An attachment only interdicts any private transfer or delivery of the property or of any interest thereon. It does not create any encumbrance on the property. Since an attachment only prohibits private transferor delivery of the property, it does not prevent an involuntary sale (Thiruvenkita Reddiar v. Noordeen, 1977 KLT 877, Rukhmani v. Ramsaroop, AIR 1944 Nag. 324, Subbarao v. Official Receiver, AIR 1965 A.P. 52 ). It does not create any encumbrance on the property. Since an attachment only prohibits private transferor delivery of the property, it does not prevent an involuntary sale (Thiruvenkita Reddiar v. Noordeen, 1977 KLT 877, Rukhmani v. Ramsaroop, AIR 1944 Nag. 324, Subbarao v. Official Receiver, AIR 1965 A.P. 52 ). The attachment has therefore no relevance so far as a court sale is concerned and is not a material particular required to be mentioned in the proclamation of sale. We are therefore of the opinion that the non-mention of the attachment effected in O.S.No.191 of 1981 in the proclamation of sale was not a material irregularity vitiating the court sale. 19. Even otherwise, a sale can be set aside only if the material irregularity or fraud has caused substantial injury to the applicant, this being a requirement prescribed by sub-rule (2) of R.90. This requirement is not satisfied in this case. The requirements of sub-rules (1) and (2) of R.90 are cumulative and all of them have to be satisfied before a sale can be set aside under this provision. It was therefore necessary for the applicants-plaintiffs to establish that they had sustained substantial injury by reason of the non-mention of the attachment the proclamation of sale. 20. The existence of the attachment in O.S.No.191 of 1981 did not prevent the sale of the property in execution of the decree in O.S.No. 3 of 1973. The property could be sold in execution irrespective of the attachment in as much as a sale in execution is not interdicted by an attachment. The existence of the attachment in O.S.No.191 of 1981 was not therefore a material detail which could affect either the validity of the sale, the value of the property or the price fetched at the sale. The non-mention of the attachment in the proclamation of sale could not therefore cause any injury to the applicants, much less any substantial injury as to bring the case within the purview of sub-rule (2) of R.90. 21. We have already mentioned that the lower court proceeded on the basis, without anything more, that the non-mention of the attachment is an irregularity. We have held otherwise. 21. We have already mentioned that the lower court proceeded on the basis, without anything more, that the non-mention of the attachment is an irregularity. We have held otherwise. If there is no irregularity in the publishing or conduct of the sale and in any case, there was no substantial injury caused to the applicants by reason of the alleged irregularity, the sale cannot be set aside under 0.21 R.90. The lower court has wrongly set aside the sale held on 15-2-1986. The order of the lower court is liable to be set aside and the sale has to be confirmed, in the absence of any other reason against its confirmation. We hold so. We accordingly allow C.M.A.No. 210 of 1986. 22. In the light of the above decision, the question of deciding the other two appeals on the merits does not really arise. Both, of them have really become in fructuous in as much as the property has passed on to the auction purchaser, and nothing remains with defendants 2 to 4 or the first defendant,to be proceeded against. We shall however deal with these appeals briefly on the merits, A.S.No. 227 of 1985 in the first instance, as the order impugned in E.F.A.No. 5 of 1985 is only an order passed consequent on the decision in O.S.No. 191 of 1981. 23. We shall deal with the question of limitation in the first instance. The sale was on 5-10-1973. The suit was filed on April 10,1981, more than three years from the date of the sale. Defendants 1 to 4 contend that the suit is barred by limitation as according to them, the three years period for filing the suit runs from the date of the sale, and not from the date of knowledge thereof, as contended by the plaintiffs and as accepted by the lower court. According to the plaintiffs, they came to know of the sale early in January, 1981, when it was put forward for the first time by defendants 2 to 4. The suit was filed soon thereafter. The position is well established that a suit under S.53 T.P. Act is governed by Art.113 of the Limitation Act, 1963 (corresponding to Art.120 of the J 908 act) - vide State Bank of Travancore v. Nanan, AIR 1967 Ker.171 and Tliaru C/ieru v. Mary, 1973 KLT 31. The suit was filed soon thereafter. The position is well established that a suit under S.53 T.P. Act is governed by Art.113 of the Limitation Act, 1963 (corresponding to Art.120 of the J 908 act) - vide State Bank of Travancore v. Nanan, AIR 1967 Ker.171 and Tliaru C/ieru v. Mary, 1973 KLT 31. The question is when the right to sue accrues and time begins to run. the matter was considered elaborately by a Division Bench of the Bombay High Court in Abdallakhan v. Purushottam, AIR 1948 Bom. 265. Gajendragadkar, J. speaking for the Bench relied heavily on the decisions in Mt. Bolo v. Ml. Kok/an, AIR 1930 P.C. 270, Annamalai Cliettiar v. Miithukanippan, AIR 1931 P.C. 9 and Firm O. Rin. O.M.Sp. v. Nagappa Chettiar, AIR 1941 P.C.1 and held that limitation fora suit under S.53 of the Transfer of Property Act commences when the plaintiff had knowledge of the fraudulent transfer and not from the date on which the plaintiff decides to exercise option of avoiding it. He observed: "It must now be taken to be settled that in regard to suits falling under Art.120 the right to sue cannot accrue until the right asserted is infringed or unequivocally threatened, and in cases where the right is based upon an allegation of fraud, limitation cannot commence unless the party asserting the right had knowledge of the said fraud. It is obvious that under S.53, T.P.Act, creditors can impeach only such transfers as are intended by the debtor to defeat or delay his creditors. The right to sue accrues not only because the creditor is defeated or delayed, but because he is defeated or delayed owing to a fraudulent transfer." In Ahmed Ali v. Neeralla, AIR 1959 A.P. 280, the High Court of Andra Pradesh held clearly that the cause of action for such a suit does not arise on the date of the alienation, but on the date when the creditor who seeks to set aside the alienation knows that he has been do fraudcd, defeated or delayed (See also Marthandii Rao v. Clienna Basappa, AIR 1951 Mad. 388). Having regard to this consistent line of decisions with which we are in respectful agreement, it has to be held that the suit filed on April 10, 1981 was in time. 24. The further question whether the sale Ext. 388). Having regard to this consistent line of decisions with which we are in respectful agreement, it has to be held that the suit filed on April 10, 1981 was in time. 24. The further question whether the sale Ext. B2 is hit by S.53 of the Transfer of Property Act has been discussed in detail by the lower court and it has been held that it was one intended to defeat and delay the creditors of the first defendant. We arc in agreement with this conclusion, the reasons for which we shall state. The transfer was by the first defendant mother to her three sons defendants 2 to 4, who, it is in evidence, were all slaying with her. This was at a time when the suits had been filed against the first defendant by Devassy and others and the fifth defendant, for recovery of the amounts due to them from the St. Joseph's Trading Company. The first defendant cannot pretend ignorance of the existence of the dues of the said firm, of which she was a partner, and in respect of which the suits had already been filed. No explanation is forthcoming as to why the sale had to be effected at this juncture in favour of the sons, who were all staying with the first defendant. Even if it was a question of making arrangements for payment to Devassy the plaintiff in O.S.No. 74 of 1972, it is not disclosed why a sale was necessary and that too, of all the properties owned and possessed by the first defendant, having regard to the close relationship between the parties and their living together. It is also noteworthy that though the consideration was stated to be Rs. 12000/ - only Rs. 750/- was paid, and the balance was reserved with the sons, defendants 2 to 4, to be paid to the decree holder and if it was not payable, to be paid to the first defendant herself at that stage. But it is again significant that the balance amount of Rs. 11250/- did not carry any interest, if it was payable to the first defendant. The sale was not disclosed when the execution proceedings for sale of this property were taken by the decree holder Devassy in O.S.No. 74 of 1972. But it is again significant that the balance amount of Rs. 11250/- did not carry any interest, if it was payable to the first defendant. The sale was not disclosed when the execution proceedings for sale of this property were taken by the decree holder Devassy in O.S.No. 74 of 1972. The property was sold in court auction and it was only thereafter that defendants 2 to 4 came forward with their application E. A.No. 36 of 1981 on the basis of Ext. B2, depositing the decree amount and poundage. In other words, even the amount due to Devassy was paid only long afterwards, after over seven years from the sale and even after about three years from the date of decree, namely 3-1-1978. There is no case for the defendants, despite their prelcncc of ignorance of the dues of the St. Joseph's Trading Company - which we find it difficult to accept -that any enquiry was made by any of these defendants about the liabilities of that tirm. In fact, the second defendant as D.W.2 admitted that no such enquiries had been made. This really strikes at the root of the bona fides of both the transferor and the transferee. The first tax payment after the transfer so far as it is in evidence is only 10-8-1977, about four years later. The value of the property at the time of Ext. B2 is not in evidence, but it is a fact that all the immovable assets of the first defendant stood transferred by that sale. 25. The cumulative effect of these circumstances, particularly the close relationship between the parties and the sale having been effected admittedly for payment of a debt (which according to the defendants may or may not arise ) in the future, is to lead to the inference that the sale was one intended to screen the property from the creditors who had already filed their suits, and to defeat and delay them. The non-examination of the first defendant and the absence of any explanation for the necessity for a sale to the children to discharge a debt on a long future date are also pointers in this direction. We have therefore no hesitation in holding that the sale Ext. B2 was one intended to defeat and delay the creditors of the first defendant. 26. The principle the decision in Rajeswari & Co. We have therefore no hesitation in holding that the sale Ext. B2 was one intended to defeat and delay the creditors of the first defendant. 26. The principle the decision in Rajeswari & Co. v. Union of India, AIR 1973 Mad. 222 which was affirmed in Union of India v. Rajeswari & Co., AIR 1986 SC 1748 relied on by the defendants does not apply to the facts of this case. In that case, the transfers were in anticipation of some possible claims that may be made by the Union of India on the reopening of an assessment to income-tax for which proceedings had already been initialed, with the debtor discharging all his dues with the proceeds of the transfers. It was in evidence that one of the main objects of the sales was to pay off those debts. In those circumstances, the Madras High Court salvaged the transfers on the ground that that was a case where the debtor had only preferred his other creditors to the Union, which he was entitled to do, where no consideration of bankruptcy or insolvency arose. That is not the case here where the sale was at best to pay off one of the many creditors and that too in the distant future. We are therefore at one with the lower court in holding that the transaction Ext. B2 was one intended to defeat and delay the creditors of the first defendant, that defendants 2 to 4 are not bona fide transferees and that therefore it is liable to be avoided at the option of the plaintiffs. The suit O.S.No.191 of 1981 was rightly decreed by the lower court. E. A.No. 85 of 1981 was also therefore rightly dismissed. 27. But this is not going to be of any benefit to the plaintiffs as we indicated earlier, as the property has subsequently been sold in court auction and purchased by Rosily. No doubt she is the wife of the second defendant, but that is of no assistance to the plaintiffs to proceed against the property. Though the plaintiffs have succeeded in their suit they are in effect having only the shadow of success. 28. It was mentioned that the plaintiffs could claim benefit of rate able distribution under S.73 of the C.P.C. It is for them to claim it if the requisite conditions are satisfied. Though the plaintiffs have succeeded in their suit they are in effect having only the shadow of success. 28. It was mentioned that the plaintiffs could claim benefit of rate able distribution under S.73 of the C.P.C. It is for them to claim it if the requisite conditions are satisfied. We arc not expressing any opinion on the point. C.M.A. No. 210 of 1986 is allowed and E.A.No.154 of 1986, Sub Court Thrissur is dismissed. The parties will suffer their respective costs in this appeal. A.S.No. 227 of 1985 and E.F.A.No. 5 R. f 1985 arc both dismissed with costs.