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2010 DIGILAW 1173 (HP)

State of Himachal Pradesh v. Jagdish Chand

2010-10-08

V.K.AHUJA

body2010
JUDGMENT : V.K. Ahuja, J. 1. This is a regular second appeal filed by the appellant under Section 100 of the CPC against the judgment and decree, dated 1.6.2000, passed by the learned Additional District Judge(I), Kangra at Dharamshala, vide which, the judgment and decree passed by the learned Senior Sub Judge, Kangra at Dharamshala, dated 29.5.1999, was affirmed. 2. Briefly stated, the facts of the case are that the appellants, hereinafter also referred to as the plaintiffs, filed a suit for declaration and for recovery of money as against the respondents, hereinafter referred to as the defendants. It was alleged by the plaintiffs that in an open auction held on October 10 and 11, 1979, defendant No. 1, a registered firm through its proprietors defendant No. 2 and 3, purchased lot No. 17/79-80 consisting of 357 chil trees from Forest Department for consideration of Rs.1,39,000/-. The bid was accepted by the plaintiffs vide letter dated 29.2.1980 and the agreement was entered into in between plaintiff No. 1 and defendant No. 1. The work was to be completed, as per the plaintiffs, by June 30, 1980. It was alleged that the total sale money, including royalty, sales tax and surcharge recoverable from the lessees in three instalments, was amounting to Rs.1,77,225.05. Defendant No. 1 only paid a sum of Rs.49,211.25 and failed to pay the balance amount and a sum of Rs.1,28,013.80 remained outstanding. Defendant was served with a notice vide letter, dated 27.11.1980, calling upon to clear the dues. Security amount of Rs.13,900/- was forfeited by the plaintiff in view of Clause 20 of the agreement. The forest produce lying at the spot was also put to auction and proceeds amounting to Rs.10,000/- were also adjusted in the outstanding amount. However, defendant No. 1 failed to pay royalty and sales tax and the total loss sustained by the plaintiff was Rs.1,28,520.85. 3. It was further alleged that call notice was also served upon defendant No. 1 vide letter dated 10.7.1981, but he did not pay the amount. A letter was sent to the Collector, Dharamshala to recover the amount as arrears of land revenue and only a sum of Rs.8,100/- could be recovered by the Collector. The outstanding amount of Rs.1,06,520.85 could not be recovered since defendant No. 1 had transferred his property in favour of his family members. A letter was sent to the Collector, Dharamshala to recover the amount as arrears of land revenue and only a sum of Rs.8,100/- could be recovered by the Collector. The outstanding amount of Rs.1,06,520.85 could not be recovered since defendant No. 1 had transferred his property in favour of his family members. Thus, the present suit for declaration filed by the plaintiffs challenging the transfer by defendants No. 2 and 3, by way of sale deed dated 22.4.1981. The plaintiffs also challenged the gift deed made by defendant No. 3 vide gift deed dated 9.4.1981. Thus, it was alleged that these transactions were collusive to avoid the payment and as such the suit for declaration and for recovery of the amount filed by the plaintiffs. 4. Defendants pleaded that the agreement in question was not a valid and the plaintiffs were not entitled to recover any amount from the defendants. They also took up the plea of locus standi, maintainability etc. However, they pleaded that the transactions were genuine and these cannot be challenged by the plaintiffs and as such the suit was liable to be dismissed. 5. On the pleadings of the parties, 13 issues were framed by the learned trial Court and I need not reproduce the same. However, on conclusion of the trial, the learned trial Court held that defendant No. 1, through defendants No. 2 and 3, had purchased lot, as alleged by the plaintiff in the plaint, and a sum of Rs.1,06,520.85 remained outstanding from the defendants. However, it was held by the learned trial Court that since the notice for recovery of money was issued to the Collector later on, but the sale deed and gift deed had already been executed, therefore, it was held that the proceedings were not aimed at defrauding the plaintiffs or avoiding the recovery of the amount in question. Those findings were upheld by the learned Additional District Judge and the findings of the learned trial Court were affirmed. Feeling aggrieved, the appellants have filed the present second appeal. 6. I have heard the learned counsel for the parties and have gone through the record of the case. 7. Those findings were upheld by the learned Additional District Judge and the findings of the learned trial Court were affirmed. Feeling aggrieved, the appellants have filed the present second appeal. 6. I have heard the learned counsel for the parties and have gone through the record of the case. 7. On appraisal of the judgment passed by the learned trial Court, which was affirmed by the learned First Appellate Court, it is clear that the defendants had conceded that they had purchased the lot and it was also not disputed that a sum of Rs.1,06,520.85 remained outstanding. The dispute which was raised before the learned trial Court was in regard to the sale deed and the gift deed whether they were valid or not and those findings were given as against the plaintiffs. On appeal, the Appellate Court also held that since the defendants were in a debt and owed the amount to the plaintiffs, but the letter, dated 13.7.1981, to the Collector Ext. P-5 was sent, after the transfers were effected by the defendants vide sale deed and gift deed much earlier in the month of April, 1981. Thus, it was held that there was no intention of defendants No. 2 and 3 to defeat or delay the recovery of the outstanding amount by way of the said proceedings. It was also observed that the plaintiffs have failed to prove that the outstanding amount sought to be recovered as arrears of land revenue was outstanding against the defendants. Thus, the only point raised was as to whether the amount can be said to be outstanding as against the plaintiffs on the date of transfer and the mere fact that the letter Ext. P-5 for recovery of the amount was issued on 13.7.1981, after the deeds were effected in the month of April, 1981, it can be said that the transactions were bona fide or not. 8. It is not disputed that the lot was purchased by the plaintiff in the open auction held on October 10 and 11, 1979. The bid was accepted on 29.2.1980 and the agreement was entered into in between the parties. 8. It is not disputed that the lot was purchased by the plaintiff in the open auction held on October 10 and 11, 1979. The bid was accepted on 29.2.1980 and the agreement was entered into in between the parties. The amount had become due and the defendant was served with a notice vide letter dated 27.11.1980 to clear the arrears and thereafter his security amount of Rs.13,900/- was forfeited and the forest produce was also sold and a sum of Rs.10,000/- was adjusted towards the outstanding amount. Thereafter another notice was issued to defendant No. 1 vide letter dated 10.7.1981 to pay the amount. Thus, it is clear that before the defendants executed the gift deed and sale deed in April, 1981, he was already aware of the outstanding amount as against him and the notice received by him from the plaintiff to pay the sum of Rs.1,28,520.85. Another notice was also served on 10.7.1981 and thereafter the letter, dated 13.7.1981, was written to the Collector to recover the amount as arrears of land revenue. Once the defendant had already been issued a notice calling upon him to pay the amount, vide letter dated 27.11.1980, and forfeiture of the security amount vide letter dated 1.12.1980, it was clear to defendants No. 2 and 3 that they were liable to pay the amount on the date they executed the gift deed and sale deed in April, 1981 Ext. PW-5/A and Ext. PW-5/B. The mere fact that the letter was issued to the Collector after the said date is not sufficient to hold that the amount was not due to the plaintiffs from the defendants on the date the gift deed and the sale deed were executed. The amount in question was outstanding and, therefore, there was a relationship of creditor and debtor in between the parties and it had to be considered as to whether the transaction can be said to be valid or not and whether there was intention to defeat the payment of the amount. 9. The amount in question was outstanding and, therefore, there was a relationship of creditor and debtor in between the parties and it had to be considered as to whether the transaction can be said to be valid or not and whether there was intention to defeat the payment of the amount. 9. The learned counsel for the respondents had relied upon a decision in Chumar v. Alima and others, AIR 1998 Kerala 139, wherein, on the facts of the case, it was held that there was no circumstance to be held as badges of fraud and that the sale deed was not hit by Section 53 of the Transfer of Property Act on the ground that it was fraudulent transfer. It was also observed that in the case of subsequent debts, there must be proof of positive fraud in fact to vitiate a voluntary conveyance. The mere fact of subsequent indebtedness is not evidence of a fraudulent intent against subsequent creditors. The observations were made in view of the facts of that case and the question related to the subsequent creditors, whether they can impeach and avoid the voluntary conveyance under Section 53 of the Transfer of Property Act. 10. On the other hand, the learned Assistant Advocate General had relied upon the following decisions. The decision in Chogmal Bhandari and others v. Deputy Commercial Tax Officer II Division, Kurnool, AIR 1976 Supreme Court 656 was relied upon wherein it was observed by their Lordships in para 7 of the judgment as under: "Under Section 53 of the Transfer of Property Act a person who challenges the validity of the transaction must prove two facts - (1) that a document was executed by the settler; and (2) that the said document was executed with clear intention to defraud or delay the creditors. How the intention is proved would be a matter which would largely depend on the facts and circumstances of each case. It is well settled that the mere fact that a debtor chooses to prefer one creditor to the other, either because of the priority of the debt or otherwise, by itself cannot lead to the irresistible inference that the intention was to defeat the other creditors." 11. It is well settled that the mere fact that a debtor chooses to prefer one creditor to the other, either because of the priority of the debt or otherwise, by itself cannot lead to the irresistible inference that the intention was to defeat the other creditors." 11. Reliance was also placed upon the decision in C. Abdul Shukoor Saheb v. Arji Papa Rao (deceased) after his heirs and legal representatives and others, AIR 1963 Supreme Court 1150, wherein, in para 10 of the judgment it was held that the question whether the sale was to defeat or delay creditors within Section 53 of the Transfer of Property Act. The entire evidence was before the court. The question of burden of proof was merely automatic, except in a rare case where considerations are evenly balanced, which would have little significance. The observations made in para 17 are relevant which are being reproduced below: "Where fraud on the part of the transferor is established by the terms of paragraph (1) of Section 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 he took the sale honestly believing that the transfer was in the ordinary and normal course of business." 12. Coming to the facts of the case, the transferor, namely, respondents No. 2 and 3, had already received the notice for the payment of the dues on 27.11.1980, which was a notice to clear the arrears. Thus, the amount in question was outstanding on that date and it was within the knowledge of the defendants that the amount was due by them to the appellant. However, still the gift deed and sale deed were executed in April, 1981 i.e. after the receipt of the call notice. The mere fact that second notice issued to the Collector to recover the amount as arrears of land revenue vide letter dated 10.7.1981 is not sufficient to hold that the defendants were not aware of the outstanding amount or that the call notice was not issued to them prior to the execution of the sale deed and the gift deed. 13. A perusal of the gift deed Ext. 13. A perusal of the gift deed Ext. PW-5/A shows that it was executed in favour of the wife of the executant and grand son of defendant No. 3. A perusal of the sale deed Ext. PW-5/B shows that it was executed by defendant No. 2 and the sale consideration i.e. Rs.5,000/-, out of the total sale consideration, had been received at the residence and not before the Sub Registrar. 14. Nothing more was required to be proved by the plaintiffs except the fact that the amount in question was outstanding on the date when the deeds were executed and the fact that these were executed by both defendants No. 2 and 3 stands established which clearly prove that these were to avoid payment of the dues to the plaintiffs. The transferee have not stepped into the witness box to show that these deeds were executed bonafidely and as such in view of the case law discussed above, it is clear that there was no question of any other proof or the onus which was irreverent, once the parties had led evidence and the fact established that it was to avoid payment of the dues of the plaintiffs. Both the transactions are accordingly held void and the findings under Issue No. 5 are decided in favour of the plaintiffs and as against the defendants. 15. In view of the above discussion and findings, the suit of the plaintiffs for declaration as well as for recovery of amount stands decreed and the gift deed Ext. PW-5/A and sale deed Ext. PW-5/B are declared to be null and void and the plaintiffs are entitled to recover the amount from defendants No. 1 to 3. The appeal stands allowed accordingly. However, the parties are left to bear their own costs.