PONNUSWAMI GOUNDAR Vs. S R RAMASAMI CHETTIAR

JUDGEMENT

(1.) THE first defendant in O.S.No.128 of 1973, Sub-Court, Tirupattur, who succeeded in the trial Court and lost before the lower appellate Court, is the appellant in this Second Appeal. THE first respondent herein instituted O.S.No.128 of 1973, praying to set aside the claim order passed in I.A.No.98 of 1972 in O.S.No.102 of 1971, Sub Court, Tirupattur, purporting to do so in representative capacity on behalf of the creditors of the second respondent herein. THE circumstances giving rise to the Second Appeal may be briefly referred to. THE respondents 3 and 4 in this Second Appeal are the sons of the second respondent and all of them constituted members of a Hindu undivided family which owned the suit properties. THE suit properties consist of three items, namely, R.S.No.297/1 4 acres 48 cents with a 3 H.P. motor and pumpset, R.S.No.288 5 acres with a well and survey No.290 3 acres and 62 cents with trees in Simmanapudur village, Tirupattur taluk, North Arcot District. THE second respondent has married the sister of the appellant. THE second respondent is stated to have borrowed from the first respondent on two promissory notes dated 2.5.1969 and 2.11.1970. For the recovery of the amounts due under the promissory notes, the first respondent herein instituted O.S.No.102 of 1971, Sub Court, Tirupattur. On 9.11.1971, the appellant and the second respondent entered into an agreement for the sale of the suit properties by the respondents 2 to 4 in favour of the appellant. Pursuant to the agreement for sale, on 27.11.1971, a sale deed was also executed by the second respondent herein for himself and on behalf of his sons, the respondents 3 and 4 in favour of the appellant with reference to the suit properties. After having instituted the suit in O.S.No.102 of 1971, Sub Court, Tirupattur, the first respondent filed I.A.No.786 of 1971 on 18.12.1971 for an order of attachment before judgment of the suit properties and an order for attachment was made and upon a claim preferred by the appellant in I.A.No.98 of 1972 on the strength of the sale deed dated 27.11.1971 in his favour, the claim petition was allowed and the attachment was raised on 12.12.1972. On 7.9.1973, the first respondent obtained a decree in O.S.No.102 of 1971, Sub Court, Tirupattur, against the respondents 2 to 4. Alleging that the sale deed executed by the respondents 2 to 4 in favour of the appellant on 27.11.1971 was intended to defeat and delay the creditors of the second respondent and that no consideration passed thereunder, that the sale was for a very low price and was also a sham and nominal one and that possession of the properties continued to remain with the respondents 2 to 4 despite the sale in favour of the appellant, the first respondent instituted O.S.No.128 of 1972 praying for setting aside the order in I.A.No.98 of 1972 in O.S.No.102 of 1971 not only on his behalf but also on behalf of the other creditors of the second respondent.

(2.) THE second respondent remained ex parte. THE respondents 3 and 4 filed a written statement adopting the stand taken by the appellant. In his written statement and additional written statement the appellant contended that on 9.11.1971 there was an agreement for the sale of the suit properties entered into between the appellant and the second respondent, which was also attested by the first respondent and another Marappa, who were the creditors of the second respondent and that on 27.11.1971, a sale deed was executed by the second respondent on his behalf and on behalf of the respondents 3 and 4 in favour of the appellant for valuable consideration. That transaction of sale, according to the appellant, was not intended to defeat or delay any of the creditors of the second respondent. THE appellant also pleaded that there was no under valuation of the properties, but that the sale was a genuine transaction and the appellant was a bona fide purchaser for value. THE possession of the properties, according to the appellant, remained with him and the sale deed dated 27.11.1971 was neither a sham nor a nominal transaction as claimed by the first respondent. THEre was no collusion between the appellant and the second respondent, according to the appellant, but that the respondents 1 and 2 had colluded with each other to defeat the rights of the appellant. THE appellant also pleaded that excepting the mortgage debts which had been discharged by the sale executed on 27.11.1971, he was not aware of any other debt and that the properties had been sold for a proper price and, therefore, no case for setting aside the order passed on the claim petition was made out.

(3.) THUS, the main question for consideration in this Second Appeal is, whether the appellant was aware of the existence of the promissory note debts stated to be due by the second respondent to the first respondent and had deliberately refrained from making any provision for the discharge of those debts at the time of the sale of the properties belonging to the second respondent in his favour. Exhibit B-2 dated 9.11.1971 is the agreement for sale entered into between the appellant and the second respondent for the sale of the suit properties. P.W.3 is the writer of Exhibit B-2. Four persons have attested Exhibit B-2 of whom the first respondent is one and the other creditor Marappa is another. The first respondent examined as P.W.1 admits having attested Exhibit B-2, but stated that he did so because the appellant agreed to discharge not . only the mortgage debts but also the promissory note debts. He would further admit that at the time of entering into Exhibit B-2, it was for the purpose of discharging the debts due to him and Marappa Sounder and that a mortgage debt of Rs.15,000/- was due to Marappa Gounder and further that for the mortgage debt, no interest had been paid for years. He had specifically admitted that the appellant did not enter into Exhibit B-2 or got the sale deed under Exhibit B-3 executed to defeat or defraud the debts due to him and Marappa. From this admission of P.W.1, it is obvious that no infirmity can be attached either to the agreement for sale under Exhibit B-2 or the sale under Exhibit B-3. In the course of his cross-examination, he would admit that he did not read whether what was orally stated by the appellant with reference to the discharge of the debts was incorporated in Exhibit B-2 or not. He would also admit that he did not say that if only what the appellant stated towards the discharge of the debts was written in Exhibit B-2, he would sign. P.W.1, on his own showing, is having money-lending transaction to the tune of nearly two lakhs of rupees and he is also well-versed in litigation and Court proceedings. It is, therefore, impossible to accept that the first respondent would have attested Exhibit B-2, if the appellant had agreed to discharge the promissory note debts due to the first, respondent and that had not been incorporated in Exhibit B-2 P.W.3 is the scribe of Exhibit B-2. In the course of his chief-examination, he has stated that at the time of Exhibit B-2, the second respondent stated that the sale was for the purpose of discharging the debts of Marappa and the debts of the first respondent under mortgages and promissory notes and that the appellant agreed to discharge those debts prior to the sale. But in the course of his further evidence, he would say that nobody said that it should be written in that manner. He should also significantly add that in his presence no talks on matters apart from those mentioned and recited in Exhibit B-2 took place and that as soon as he came, he started writing Exhibit B-2 as directed and that he immediately left. The latter part of the evidence of P.W.3 clearly indicates that there was an agreement on the part of the appellant to discharge the other promissory note debts due to the first respondent certainly cannot be true. It is also seen from the evidence of P.W.3 that he had been writing several documents and promissory notes for the first respondent and in that sense interested in him. It is also curious that while P.W.3 is unable to remember the last promissory note written by him for the first respondent, he remembers the conversation that is stated to have taken place in November, 1971, when Exhibit B-2 was written. P.W.2 is the scribe of the sale deed Exhibit B-3 and he attempted to say that at the time of Exhibit B-3, there was some talk about the discharge of the promissory note debts due to the first respondent and the appellant agreed to dxscharge them also. If that was really so, then that could have been incorporated in Exhibit B-3 itself. Exhibit B-3, according to P.W.2, was not secretly written and if at the time of writing of Exhibit B-3 there was some talk with reference to the discharge of the promissory note debts also, that could have been reduced to writing. On the other hand, the evidence of D.W.1 is that whatever was discussed and agreed to by the parties had been incorporated in Exhibits B-2 and B-3 and there was no agreement beyond what was recorded. In this state of evidence, there is nothing to establish that the appellant had any knowledge of the promissory note debts due by the second respondent to the first respondent and if he had no such knowledge, the question of the appellant having undertaken to discharge those debts would not arise at all. Unfortunately, the lower appellate Court has not adverted to the admissions of P.Ws.1 and 3 and the evidence of P.W.2 as well with reference to what actually transpired at the time of the writing of Exhibits B-2 and B-3. The evidence of P.Ws.1 to 3 does not establish any knowledge of the promissory note debts on the part of the appellant either at the time of Exhibit B-2 or Exhibit B-3 or that he was otherwise aware of the promissory note debts due to the first respondent by the second respondent and that in spite of such knowledge, no provision was made for the discharge of those debts. Avowedly, in this case, the sale in favour of the appellant under Exhibit B-3 was intended only for the purpose of discharging the debts of. the second respondent. While care has been taken to mention certain mortgage debts, there is no mention of any of the promissory note debts stated to be payable by the second respondent to the first respondent even. It is difficult to accept that if really those debts were due at the time when Exhibits B-2 and B-3 were written as claimed by the first respondent, the first respondent would have merely allowed his signature to be taken as an attestor to Exhibit 13-2 without reciting therein the promissory note dues as well. The predominant object of sale in this case was to pay the creditors out of the proceeds and if the purchaser was unaware of the existence of the promissory note debts, as established by the evidence in this case, then the payment of particular debts only without payment of all the debts would at best be a case of fraud-ulent preference which could be impugned only under the law relating to insolvency and cannot be characterised as a fraud, on creditors so as to justify the initiation of proceedings under section 53 of the Transfer of Property Act, as pointed out by the Supreme Court in ABDUL SHUKOOR SAHEB v. ARJI PAPA RAO, A.I.R. 1963 S.C.1150. Considering the evidence establishing the circumstances under which Exhibits B-2 and B-3 came into being and drawing from such evidence and the admissions, the proper legal inferences, which had been omitted to be considered and drawn by the lower appellate Court, it is not possible to accept the conclusion of the lower appellate court that the appellant was aware of the promissory note debts due to the first respondent at the time when Exhibits B-2 and B-3 were executed. It would, therefore, follow that the sale deed in favour of the appellant under Exhibit B-3 dated 27.11.1971 was not one executed with an intent to defeat or delay the creditors of the second respondent. Since the evidence does not establish that the appellant had knowledge of the promissory note debts due by the second respondent to the first respondent, the sale in favour of the appellant under Exhibit B-3 without any knowledge on his part of those debts, has to be held to be done in favour of the bona fide purchaser for value. Having regard to these consideration, the judgment and decree of the learned District Judge, North Arcot at Vellore, are set aside and those of the learned Subordinate Judge, Tirupattur, will stand restored. The Second Appeal is allowed with costs throughout.