Siju Francis v. Gujj Surappadu Reddy and Others

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE &** **THE HONOURABLE MR. JUSTICE P.SOMARAJAN** **FRIDAY, THE 9TH DAY OF MARCH 2018 / 18TH PHALGUNA, 1939** **Ex.FA.No. 9 of 2006** **AGAINST THE ORDER/JUDGMENT IN OS 88/1999 of PRINCIPAL SUB COURT,KOCHI DATED 31-01-2006** **APPELLANT/PETITIONER IN EA 29/2004** **SIJU FRANCIS S/O.T.FRANCIS, AGED 27 YEARS,, THARAYIL HOUSE, H.NO.CC 16/452, KOCHI-5.** **BY ADVS.SRI.N.N.SUGUNAPALAN (SR.) SRI.S.SUJIN** **RESPONDENT(S)/DECREE HOLDER IN OS 88/99 & RESPONDENT NOS.2 &3 ARE J.D.IN** **O.S.NO.88/99:** **1. GUJJU SURAPPADU REDDY S/O.LATE RAMASWAMY, AGED 52 YEARS,, CHINNA BAZAR, BHEEMUNIPATNAM,, VISHAKHAPATNAM DISTRICT.** **2. T.M.THOMAS, S/O.LATE T.J.MATHAI,, HOUSE NO.B/452, KAZHUTHUMUTTU, KOCHI-5.** **3. T.FRANCIS, S/O.LATE T.J.MATHAI,, HOUSE NO.8/452, KAZHUTHUMUTTU,, KOCHI-5.** **R2 BY ADV. SRI.V.K.BALACHANDRAN R1 BY ADV. SRI.KOSHY GEORGE R2 BY ADV. SRI.S.SHYAM R3 BY ADV. SRI.SIMON LUIZ** **THIS EXECUTION FIRST APPEAL HAVING BEEN FINALLY HEARD ON 14-02-2018, THE COURT ON 9-03-2018 DELIVERED THE FOLLOWING:** ## **A.M. SHAFFIQUE & P.SOMARAJAN, JJ.** ========================== EX F.A.No.9 of 2006 ================ Dated this, the 9[th] day of March, 2018 ## **J U D G M E N T** ## _**Shaffique, J.**_ The petitioner in EA No.29/2004 in EP No.44/2002 in OS No.88/1999 on the file of the Sub Court, Kochi is the appellant herein. The application was filed under Order XXI Rule 58 of C.P.C. claiming right and title in respect of the attached property. 2. First respondent herein obtained a decree against respondents 2 and 3 for recovery of `33,74,892/- with future interest and costs. EP No.44/2002 was filed for recovery of the amount. An application EA No. 204/2002 was filed for attaching 7.5 cents of land in Sy.No.1173/1 together with residential building. An order of attachment was passed on 11/8/2003. 3. The appellant claimed that he alone has right to the property as he purchased the same as per Sale Deed No.1159/1989 of the Cochin Sub Registry. The assignor was the third respondent. In so far as the right of the decree holder/1[st] respondent had arisen EX F.A.No.9 of 2006 -:2:- only subsequent to the sale, his property cannot be attached and sold for executing the decree. The 1[st] respondent contended that claim petitioner is the son of the 3[rd] respondent (2[nd] judgment debtor). The transaction under which claim petitioner purchased the property was only to defeat the creditors of the second judgment debtor as he was under obligation to pay money to different persons. That apart, claim petitioner was a minor aged 11 years at the time of purchasing the property and therefore execution will have to proceed ignoring the said sale. 4. Before the Execution Court, mother of claim petitioner was examined as PW1. She relied upon Exts.A1 to A5. The Execution Court however opined that at the time when the sale deed was executed in the name of the appellant, he was only 11 years of age and even according to PW1, there were other liabilities for the second judgment debtor and therefore it being a fraudulent sale, the claim petition was dismissed. 5. Learned counsel for the appellant while impugning the aforesaid order _inter alia_ contended that as far as the first respondent is concerned, he had transaction with respondents 2 and 3 only in the year 1995 and the suit is filed only in the year EX F.A.No.9 of 2006 ## -:3:- 1999 and well before the transaction had occurred, the property had been assigned in the name of the claim petitioner and therefore Court below committed serious error in declaring the document as sham. Secondly, it was contended that for availing loan from KFC, claimant's father had mortgaged other valuable properties and the said liability had already been settled. Therefore, there was no reason to proceed against the property of the claimant and the Court below therefore erred in taking a different view. 6. On the other hand, learned counsel for the 1[st] respondent placed reliance on the judgment of the learned Single Judge of this Court in _**Ithaku Abraham v. Kesavan Damodaran**_ (1987 (2) KLT 551) in order to contend that the contention urged by the appellant was not sustainable. A decree holder is entitled to defend the claim petition on grounds available to him u/s 53 of the Transfer of Property Act (hereinafter referred to as the T.P. Act) even in a case where the transfer is intended to cheat future creditors. 7. Admittedly, the 1[st] respondent is a creditor who came into the picture by filing a suit only in the year 1999 much after EX F.A.No.9 of 2006 ## -:4:- the assignment deed in favour of the appellant. The property is attached only as per order dated 11/8/2003 in EA No. 204/2002. The contention urged by the decree holder/1[st] respondent is that at the time when the sale deed was executed in favour of the claimant in the year 1989 itself, it was a fraudulent transfer in terms of Section 53 of the T.P.Act. Oral evidence was adduced only by PW1, the mother of the claimant. 8. In her affidavit in chief, she stated that the sale deed was executed on 12/4/1989 for an amount of `1,95,000/-. Out of the total sale consideration, `50,000/- was paid on 8/3/1888, `45,000/- on 5/6/1988, `50,000/- on 23/12/1988 and `50,000/- on 12/4/1989. It is also stated that her son had taken a loan of `15,000/- on 14/12/1988 from South Indian Bank, Thoppumpady. She had given her son 1.5 Acres of land as per gift deed No.3143/1982 and there was an annual income of more than `30,000/- from the said property. Ext.A1 is the title deed. She also produced the property tax receipt to indicate that the property had been mutated in the name of the claimant. In cross examination, she admitted that during 1989, her son was only 11 years. She further admitted that during 1988, there was EX F.A.No.9 of 2006 -:5:- attachment of the same property for the liability due to KFC. She further deposed that the balance property has been sold in 2002 in favour of another son who is in America. He had discharged the debts. She denied the suggestion that there was no consideration for sale of property. She also denied the suggestion that deed was executed in order to avoid payment of the debts. 9. In an instance where the property had been assigned in the name of a near relation and thereafter he makes a claim, the burden is on the person who makes the claim to prove that he/she is a _bonafide_ purchaser for value and adequate consideration has been paid. In this case, other than the oral testimony of PW1, no materials are seen produced to prove the said payment of consideration especially when the claimant was only 11 years at the relevant time who was not an earning member of the family. That apart, even according to PW1, amount was due to KFC and there was an attachment at the time when the sale deed was executed. That there was a liability to KFC at the relevant time is not in dispute. For that reason itself, it is clear that the attempt was to defeat the creditors. When such a view is possible, the burden is on the claimant to prove that he purchased the property EX F.A.No.9 of 2006 ## -:6:- for valid consideration. The claimant did not enter the box and his mother alone has been examined. In the claim petition he does not have a case that the mother had paid the consideration on his behalf and from what consideration and from what source the funds were arranged. Therefore, there is no difficulty in arriving at a conclusion that the sale deed was executed to avoid payment of money to creditors. There is also no material to indicate as to when the liability of second judgment debtor had been finally settled. 10. Two other questions arise for consideration. One is the time gap in which the sale deed was executed and the attachment of property. As already held in _**Ithaku Abraham**_ (supra), for the purpose of avoiding a transfer by a debtor u/s 53 of the T.P. Act, it is not necessary that the transferor should have been actually indebted at the time when he makes the transfer. A transfer intended to cheat future creditors would be equally voidable at the instance of the creditor. It is also held that a plea based on S.53 can be raised by way of defence. That was a case in which a claim petition was filed under Order XXI Rule 58. The respondent, decree holder defended the matter based on S.53 of EX F.A.No.9 of 2006 -:7:- T.P.Act. Learned Single Judge of this Court after considering various authorities of the point including the judgment of the Apex Court in _**Chogmal Bhandari v. Deputy Commercial Tax Officer**_ {AIR 1976 SC 656} held at paragraphs 5 to 7 as under:- _“5 Counsel for the claimant has raised a contention that a creditor seeking relief under S.53 T. P. Act is required by law to file a suit to avoid transactions of the judgment debtor in a representative capacity on behalf of all the body of creditors of the judgment debtor. Reliance is placed on the decision of Govindan Nair J. as he then was, reported in Velama v. Raya Shenoy (1962 K.LT 801) wherein it is held that a suit under O.21 R.63 CPC (as it then stood) by a creditor decree holder to avoid a transaction by the judgment debtor as intended to defeat the creditors should be in a representative capacity on behalf of all the creditors of the judgment debtor. Reliance is also placed on the decision in C. Bhandari v. Dy. Commcrl. Tax Officer (AIR 1976 SC 656) in support of the proposition that it is not open to a creditor without recourse to a suit in a representative capacity under S.53 T. P. Act to straightaway proceed against the properties already transferred by the judgment debtor. The question in Bhandari’s case was as to whether the sales-tax authorities were entitled to ignore a deed of Trust created by the defaulter as fraudulent and intended to defeat the revenue which was the main creditor and proceed to recover the tax under the provisions of_ EX F.A.No.9 of 2006 -:8:- _S.17 of the Andhra Pradesh General Sales-tax Act as a first charge on the assessee’s property. The Supreme Court stated at page 611-_ _“10. In the special and peculiar facts of the present case which have been catalogued above, in our opinion, this is not a fit case in which the sales lax authorities can be allowed to hold that the deed of trust executed by the settlors was hit by S. S3 of the Transfer of Property Act. It may be noted that under S.53 of the Transfer of Property Act If a transfer is made with intent to defeat or delay the creditors it is not void but only voidable If the transfer is voidable, then the sales tax authorities cannot ignore or disregard it but have to get it set aside through a properly constituted suit after impleading necessary parties and praying for the desired relief.’_ _There is, however, authority for the proposition that a plea based on S.53 of the T. P. Act can be raised by way of defence and, if raised as a defence, there is no need to defend the suit in a representative capacity on behalf of all the creditors of the judgment debtor. The Supreme Court in Abdul Shukoor v. Arji Papa Rao (AIR 1963 SC 1150) states at page 1160:-_ _“(31) We shall first refer to the purpose of the amendment. In decisions rendered prior to the amendment, there were a large number in which it was held, following certain English cases decided with reference to 13 Eliz. Ch. 5 on which S. S3 (1) was based, that suits by creditors for avoiding a transfer under S.53 (1) was a representative action._ EX F.A.No.9 of 2006 ## -:9:- _To that general rule however, an exception was recognised in a number of decisions when the suit was to set aside a summary order under Order XXI R.33 and was brought by an attaching decree-holder against whom an adverse order had been made in the summary proceedings, it being held that such a suit need not be in a representative capacity. The decisions on this point were however not uniform. It was merely to have a uniform rule and to avoid these conflicting decisions that the third paragraph was inserted so that after the amendment the rule that a suit by a creditor should be brought in a representative capacity would apply as much to a suit to set aside a summary order under O. XXI R.63 as to other suits. It was not suggested that there was anything in the terms of the amended S.53 (1) which referred to a defence to a suit and, in fact, learned Counsel did not contend that if defence under S.53(1) could be raised by a defeated attachingcreditor such a defence had to be in a representative capacity, and we consider that learned Counsel was correct in this submission. From a provision as to to how a plaintiff, if he filed a suit, should frame it, we can see no logical process by which it could be held that a defendant cannot impugne the validity of the sale which is voidable at his instance.”_ _6 In the present case the plea based on S.53 of the T.P. Act is raised by way of defence to the claim petition filed by the claimant under O.21 R 58 C.P.C. R.58 as amended by the C.P.C. Amendment Act 104/1976 expressly provides that all questions_ EX F.A.No.9 of 2006 ## -:10:- _(including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or their representatives under the rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit (vide sub-rule 2). An order made under sub-rule (3) shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree (vide sub-rule (4)). In this case even though the claim was instituted prior to the amendment it was pending on 1-2-1977, the date on which the Amendment Act came into force. The pending claim petition does not fall under any of the exceptions in sub-s. (2) of S.97 of the Amendment Act and, as provided for in sub-s. (3), the claim had to be adjudicated upon in accordance with the provisions of R.58 as amended. Since the claim is to be adjudicated on all questions relating to right, title or interest in the property attached, the claimant is in the position of a plaintiff and the decree holder who opposes the claim is in the position of a defendant in a suit where the question relating to the right, title or interest in the property attached is to be determined. The decree holder is therefore entitled to defend the claim on grounds available to him under S.53 of the T.P. Act and such a defence need not be in a representative capacity on behalf of all the creditors of the judgment debtor._ _7 It is true that the burden is on the decree holder to establish that the transaction Ext. A2 is with_ EX F.A.No.9 of 2006 ## -:11:- _intent to defeat or delay the creditors of the judgment-debtor. Even though a partition as such is not a transfer, a Full Bench of this Court in the decision reported in Panchalt v. Panniyodan Mannl (AIR 1963 Kerala 66) states at p. 67:-_ _“(7) It is true that the preponderance of authority is in favour of a partition being treated as a transfer for the purposes of S. S3 of the Transfer of Properly Act, 1882. The correct view, as pointed out by Mulla, should be that a partition is not a transfer, and therefore, not strictly within that section; but that the principle of the section will apply to fraudulent partition, the object of which is not merely to give a sharer his rightful shares in the family property, but to effect the partition in such a way that such sharer would be able to defeat the creditors.”_ _In the present case, however, the partition Ext. A2 in substance and effect is a transfer of the judgmentdebtor’s rights in the property to the claimant. Ext. A2 deals with three sets of properties viz. (a) the properties left behind by Ithakku Mariam the grandmother of the judgment-debtor and the claimant, (b) the properties left behind by Ithakku Rosa, mother of the parties and obtained by her by way of gift from her brother and (c) the property gifted to the judgment-debtor and his sister Susi by father Ithakku. The claimant and the judgmentdebtor are the only executants of Ext. A2. The claimant has no right to the properties gifted to the judgment-debtor and his sister Susi under Ext. B2 gift deed by father Ithakku. The only property_ EX F.A.No.9 of 2006 ## -:12:- _allotted to the judgment debtor under Ext. A2 is a portion of Ext. B2 property. The remaining portion of Ext. B2 property is seen allotted to sister Susi. The properties in which the judgment-debtor and the claimant had equal rights are those obtained from the grandmother and the mother. All those properties are allotted to the claimant exclusively The document in substance and effect is therefore a transfer of the judgment-debtor’s rights in the properties to the claimant. Even bis share in Ext. B2 properties allotted to him is seen transferred on the same day to the claimant under Ext. B3 sale deed. If the parties had intended even properties separately acquired under gift deeds to be brought into the common pool for division among them, there was no justification for the exclusion of properties gifted by father Ithakku to the claimant under Ext. Bl gift deed from Ext. A2 partition. Ext. A2 was executed at a time when the judgment-debtor’s interests in the properties were under attachment in execution of the decrees in O.S. Nos. 57 and 58 of 1957 obtained by a third party as can be seen from Ext. B4 attachment Kaichit. Ext. B3 assignment by the judgment-debtor to the claimant of a portion of Ext. B2 properties allotted to him under Ext. A2 partition requires the transferee claimant to discharge his decree debt amounting to Rs. 2000/-in O.S. Nos. 57 and 58 of 1967. There is nothing on record, to show that the claimant had discharged the decree debt in those suits. Exts. B14 to B27 produced in this case would show that the amounts due under those_ EX F.A.No.9 of 2006 ## -:13:- _decrees were paid by the judgment-debtors in those cases in instalments during the course of execution of those decrees. Counsel for the respondents relies on the decision in Bhandari’s case referred to above in support of the proposition that the burden is on the creditor to prove that the impugned transaction was in fraud of creditors and would fall within S.53 of the T.P. Act. The Supreme Court states at page 660:7. ............Under S.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 settlor; 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.”_ _The circumstances adverted to above and relied on by the lower appellate court are sufficient to discharge the burden on the decree holder to prove that the impugned transaction Ext.A2 was with intent to defeat or delay the creditors of the judgmentdebtor. Exts. B5 to B13 adverted to earlier in this Judgment will also show that the promissory note, on the basis of which the decree holder had filed the suit and had obtained a decree, was itself in settlement of the earlier liabilities of the judgmentdebtor. I am also in respectful agreement with the view expressed by the Madras High Court in Umar Sait’s (supra)case that there is no bar against a subsequent creditor seeking to avoid a transfer as_ EX F.A.No.9 of 2006 ## -:14:- _provided for in S.53 of the T. P. Act.”_ We do not find any material to take a different view in regard to the legal proposition as held in _**Ithakku Abraham**_ (supra). Under such circumstances, we do not find any ground to interfere with the order passed by the Court below. No grounds are made out for interference. Appeal is dismissed. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Sd/- ## **P.SOMARAJAN, JUDGE** Rp //True Copy// PS to Judge