- (1.) In this Second Appeal the question is whether there is a fradulent preference within the meaning of section 53 of the Transfer of Property Act. The question arose in the following circumstances. The appellant was a creditor of the second defendant, who is the second respondent. The first respondent is also another creditor. The first respondent gave notice on 25th February, 1955, calling upon the 2nd defendant to pay a sum of money failing which he will file a suit. Thereafter a reply notice was given on 3rd March, 1955. After that, the second defendant executed a sale deed (Exhibit A-2) in favour of the plaintiff and registered the same on 8th March, 1955 ', on the same day a rental agreement (Exhibit A-3) was executed whereby the respondent-second defendant had attorned possession to the plaintiff appellant. On 9th March, 1955 the first respondent filed the suit and attached the property before judgment. A claim petition was filed in November, 1955, which was dismissed. Thereafter this claim suit was filed. The first defendant alleged that it was a nominal transaction and fraudulent preference. The consideration for the sale-deed consisted of four items. Firstly, there was a pre-existing mortgage in favour of a third party, the liability for discharge of which was undertaken by the plaintiff-appellant. Secondly, a sum of Rs. 1,600 was due to the appellant which was being accounted for towards consideration and a sum of Rs. 540 due under another promissory note to P.W. 2 was said to have been discharged by appellant. A sum of Rs. 166 was paid before the Sub-Registrar. The trial Court held that no item of consideration was established and consequently dismissed the suit as the transaction would offend section 53 of the Transfer of Property Act. The first appellate Court believed the evidence of the plaintiff and found that the sale deed was supported by consideration to the extent of Rs. 1,626-6-0. In the result, since the sale-deed is supported by consideration for less than one-third of the value of the consideration, it was held that the plaintiff was not a bonafide purchaser for value. Before I deal with the legal position, as submitted by the learned Advocate for the appellant, namely, that this transaction cannot come under section 53, Transfer of Property Act, that the question of fraud or otherwise cannot be raised by the first respondent, it may be mentioned that the trial Court held that the existence of the mortgage was not really in dispute. This is what the District Munsif aid: "No body disputes the mortgage debt as being one really owing by the 2nd defendant, the debl especially being evidenced by a registered document."
(2.) Both the Courts, however, seem to have been influenced by the fact that on the date of the suit, the mortgage had not been discharged and because it was not discharged, it did not form part of the consideration. The trial Court, however- took note of the fact and admitted the validity of the contention of the plaintiff that it is not necessary for the plaintiff to have actually discharged the mortgage to show that the sale deed, to that extent, is supported by consideration. Nonetheless, it seems to have taken the view that because it was not discharged, it creates doubts as to whether the plaintiff under Exhibit A-2 really took upon himself, the obligation to dischage that mortgage. Similarly, the first appellate Court also came to the same conclusion based on the omission of the plaintiff to actually discharge the debt on the date of the suit. It says : "He is unwilling to invest a sum of Rs. 3,167-4-0 and interest thereon at the rate mentioned in the mortgage deed, because he is not quite sure whether his title would be upheld."
(3.) It further says : "If his sale deed is declared as fraudulent transaction, he would have lost the amount that might have been paid to the mortgagee. That is the reason why he has failed to pay the mortgage debt. Therefore, it is clear that the amount of Rs. 3,167-4-0 mentioned in the sale has not been paid by the plaintiff.";