Prasad & Ors Vs. V. Govindaswami
Mudaliar & Ors [1981] INSC 198 (8 December 1981)
DESAI, D.A.
DESAI, D.A.
MISRA, R.B. (J)
CITATION: 1982 AIR 84 1982 SCR (2) 109 1982
SCC (1) 185 1981 SCALE (3)1867
CITATOR INFO :
F 1989 SC1247 (5)
ACT:
Hindu Law-Joint Hindu family-Ancestral
business carried on-Karta starting a new business-Incurring debts alienation of
joint family property by karta and his brother for liquidation of
debts-Alienation assailed by sons-Alienation- Whether valid.
Hindu Law-Antecedent debt-What is-Debt
whether to the antecedent in fact as well as in time-Whether to be independent
of and not part of the transaction impeached.
Hindu Law-Alienation of joint Hindu family
property- Validity of alienation assailed-Legal necessity and adequate consideration-Proof
of-Whether required.
Constitution of India 1950, Art. 733-Findings
of fact- Supreme Court-Interference by-When arises.
HEADNOTE:
The Karta of a Joint Hindu Family was in sole
management of the entire family affairs and he brought up his younger brother.
The ancestral family business (Kulachara ) was that of tobacco and money
lending. After sometime the Karta started a new business of lungi. In
connection with this new venture he borrowed money from others either on
promissory notes or on the security of the family properties. He suffered loss
in the new business.
When his creditors began to press him for
immediate discharge of the debts the Karta and his brother on their behalf and
on behalf of the other minors in the family entered into a written agreement on
7th July, 1955 (Ext. B- 4) with Govinda Swami Mudaliar and his two brothers
whereby they agreed to sell their almost entire property for a sum of Rs.
14,000 to discharge their debts. Pursuant to this agreement a sale deed was executed
on 22nd August, 1955 (Ext. B-5) for an enhanced consideration of Rs. 16,500.
The sale deed referred to the various debts including the mortgage debts owed
by the vendors which were to be discharged by the vendees and the balance if
any to be paid to the vendors. The vendees were asked to pay off the mortgage
debts mentioned in the sale deed in the first instance if they had no
sufficient funds to clear off all the debts.
The sons of the Karta and those of his
brother filed two suits, suit No. 107 of 1958 and suit No. 108 of 1958
respectively challenging the sale deed dated 22nd 110 August, 1955 (Ext. B-5)
and the mortgage deed of 2nd March, 1952 (Ext. B-49), and claiming partition.
In suit No. 107 of 1958 the Karta and his
brother were Defendant Nos. 1 and 2, the three minor sons of the Karta's
brother, Defendant Nos. 3 and 5 and the vendees Defendant Nos. 6 to 8, the
mortgagee, Defendant No. 9 and the official Receiver, Defendant No. 10. In suit
No. 108 of 1958 the three minor sons of the Karta's brother were the plaintiffs
and the plaintiffs and other defendants of suit No. 107 of 1958 were impleaded
as defendants.
It was alleged in the suits that the father
of the plaintiffs (Karta) started a new business of lungi which was not the
ancestral business of the family, and that in connection with the new venture
he borrowed large sums of money. He sustained heavy losses, and when the
mortgagees and unsecured creditors started pressing for immediate discharge of
the debts he executed first an agreement to sell and then a registered sale
deed for a nominal consideration of Rs. 16,500 which was grossly inadequate and
extremely low considering the extent of the land and the ancestral house and
its market value. It was further alleged that except the two mortgages
mentioned in the sale deed the other debts shown as consideration for the sale
were false and fictitious, that the said mortgages were paid by defendants 6 to
8 out of the standing crops, and that there was absolutely no necessity for
borrowing the large sums considering the large income from the joint family
properties.
A third suit (suit No. 4 of 1960) was filed
by a creditor of the Karta and his brother against the vendees, alleging that
the Karta had borrowed a sum of Rs. 1000 and executed a bond for that amount
and that barring some payments a substantial amount was due on account of
principal and interest and that the Karta executed a sham, nominal and
fraudulent sale deed in respect of the family property in favour of the
defendant with an intent to defeat and delay his creditors, and that property
worth Rs. 50,000 was alienated for a nominal price.
The claim of the plaintiffs in the suits was
resisted and contested by the transferees, alleging that the alienation by the
Karta was for payment of antecedent debts which were untainted by immorality.
The father under Hindu Law possessed a special power to alienate joint family
property including the shares of his sons for payment of his own debts not
incurred for immoral or illegal purposes and that in exercise of that power the
Karta had sold all his interest and the interest of the minor sons, that an
agreement of sale was first entered into and later on a sale deed was executed
pursuant to the agreement for sale.
The trial court held that at the time of
execution of the sale deed Ext. B-5, the 4th defendant that is the Karta owed
some creditors in whose favour he bad executed promissory notes and the bond
debts involved in Ext. A-7 to A-11; but no provision at all had been made for
these creditors either in the agreement of sale or in the sale deed. The letter
by the Karta dated 27th July, 1954 (Ext. B- 54) alongwith other oral evidence
clearly established the intention of the Karta to defeat and delay the claim of
some of the creditors in screening his property by a nominal sale in favour of
defendants I to 3. The sale deed is true and supported by consideration but
only partly, and that it is liable to be set aside wholly as 111 an imprudent
transaction. The mortgage deed is true and binding only so far as the shares of
the Karta and his brother are concerned. The alienees under the sale
transaction were not entitled to any equities.
On these findings, the trial Court passed a
preliminary decree for partition and division after setting aside the sale
transaction the alienees being directed to work out their own remedies. The
alienation dated 2nd March, 1952 was declared binding only on the shares of the
Karta and his brother to the extent of Rs. 2,000. The Court however declined to
give any relief to the alienees even in respect of the amount actually paid by
them to discharge some of the debts incurred by the Karta on the ground that
the transaction had been vitiated by fraud.
The alienees defendants preferred appeals to
the High Court but the mortgagee submitted to the judgment and decree and did
not prefer any appeal presumably because he could realise the amount due to him
by virtue of the decree granted to him, The High Court reversed the findings of
the trial court in suits Nos. 107 and 108 of 1958 and set aside the decrees but
confirmed the finding and decree in suit No. 4 of 1960, holding that the
purchase of the suit land was for a reasonable price and the consideration of
Rs. 16,500 was not a grossly low price. The lungi business started by the Karta
was a new venture and not his family business. The debts mentioned in Ext. B-5
were antecedent debts from the point of view of the plaintiffs in suit No. 107
of 1958 and were binding on them. The debts evidenced by Exts. 13 and 14 were
genuine debts and the alienation, Ext. 5 was binding on the plaintiffs in the
two suits as the sale deed was executed by their father in discharge of
antecedent debts.
In the appeals to this Court it was contended
on behalf of the appellants that the High Court had omitted to take into
consideration various circumstances considered by the trial court and as such
the findings of the High Court on material issues were vitiated, that the High
Court omitted to consider whether the impugned sale was an imprudent transaction,
if not fictitious. On behalf of the respondents it was contended that the
findings recorded by the High Court were pure findings of fact based on
appraisal of evidence and this Court cannot reverse the findings recorded by
the last court on facts Allowing the appeals ^
HELD: 1. On the evidence both oral,
documentary and circumstantial the trial court was right in holding that the
sale deed is true and that it is supported by consideration but only in part
and that even the recited consideration in the sale deed is thoroughly
inadequate and that the sale deed was executed only nominally for a collateral
purpose and with a view to stave off creditors. [ 134 D]
2. The contention of the counsel for the
respondents that finding of fact cannot be interfered with by the Court has no
force as the finding is being 112 reversed on the ground that material
circumstances had been ignored by the High Court. [134 F] In the instant case,
there is no question of giving any equities to the vendee even if some of the amount
paid by the vendee to some of the creditors of the Karta were genuine. [134 G]
3 The finding that the consideration for the sale deed was thoroughly
inadequate, is correct and the sale therefore cannot be upheld. [138 D]
4. ID order to uphold an alienation of a
joint Hindu family property by the father or the manager it is not only
necessary to prove that there was a legal necessity but also that the father or
the manager acted like a prudent man and a did not sacrifice the property for
an inadequate consideration. [137 H-138 A] In the instant case, the Karta had
contracted the debt in connection with his new personal business and to clear
all those debts he has executed the sale deed. The debt in question was an
antecedent debt so far as his sons were concerned, and therefore, they were
under a pious obligation to pay all those debts. It was open to the father to
execute a sale deed in respect of the shares of his sons also unless it was
shown that the debt was tainted with immorality or was for an illegal purpose.
The case of the sons was not that the debt was contracted for an illegal or
immoral purpose. The sale would therefore be binding on the sons of the Karta.
With regard to the sons of the Karta's brother, the same is however not the
position. In view of the factual position that the lungi business was the
individual or private business of the Karta it could not be said that his
brother had alienated the joint family property in the capacity as father of
his sons for discharging any antecedent debt incurred by him merely because he
had also joined the Karta in executing the sale. The share of the sons of the
brother could not therefore have been alienated by the Karta for discharging
antecedent debts. [135 E-H]
5. Ext. B-54, an inland letter dated 27th
July, 1954 was written by the Karta in Telugu to Veeraswami Naidu, and is the
most important document supporting the vendors. This letter has been relied
upon by the trial Court but has been discarded by the High Court. If this
letter is proved to be genuine it gives a death blow to the case of the
vendees.
This letter which bore postal stamps could
not have been fabricated. The observation of the High Court that it might have
been written subsequently is a conjecture. No such case was even set up by the
vendees in the written statement or in the evidence. The High Court attached
undue importance to the fact that if Ext. 54 reached the addressee on the 4th
August, 1955 then Exts. B-20 and B-48 could not have been prepared on the 30th
July, 1955. The difficulty is solved if a reference is made to the last
paragraph of the letter. The addressee was informed that they were coming to
meet D.W. 12 the next day. There was, therefore nothing improbable in the
preparation of these two documents on 30th July, 1955. [123 B-C, 126 A, 125 H,
126 B-C]
6. The observation of the High Court that
there was no necessity for the Karta and his brother to bring into existence
fictitious promissory notes in favour of D.W. 3 and D.W. 12 as they could have
easily mentioned the other undisputed 113 debts owed by them to support the
recital of the consideration in the sale deed, A also does not hold good
because there is ample evidence on record to warrant the conclusion that the
promissory notes in favour of W. 3 and D.W. 12, were fictitious. Most of the
debts have neither been referred lo in the deed of agreement for sale nor in
the sale deed and it was purposely done. If the aforesaid circumstances had
been taken into consideration the High Court could have had no difficulty in
accepting Ext. 54 as genuine. [126 G-127 A] In the instant case, the new
business of lungi started by the Karta ended in a loss. There was pressure from
the creditors for the discharge of the debts. As a prudent man, he would have
liked to save his property to the extent he possibly could and pay off the
various debts incurred by him. Curiously enough the Karta and his brother sold
away the entire landed property of about 47 acres, leaving behind only an acre,
and a house, owned by the joint family for a petty sum of Rs. 16,500. Out of
the total consideration of Rs. 16,500 the vendees were asked to discharge the
various debts. All the debts incurred by the Karta were not shown in Ext. B-S
and Ext. B-4 the deed of agreement. [127 C-D]
7. The stipulation in the sale deed that the
vendee pay off only the secured debts and clear off the other ordinary debts at
their leisure itself indicates that there was no anxiety on the part of the
vendors to clear of all the debts. It is also not clear why the vendors should
adopt such an attitude. These circumstances speak for themselves.
They indicate that the vendees persuaded the
Karta to execute a sale deed of almost his entire family property under the
pretext of assistance to him with the stipulation that they would re-convey the
property to the vendors after the pressure from the creditors was over. [128
C-E] 8(i) The legal position under the Hindu Law about the pious liability of
the sons to discharge the antecedent debts of the father is quite clear. A
natural guardian of a Hindu minor has power in the management of his estate to
mortgage or sell part thereof in case of necessity or for the benefit of the
estate. If the alienee does not prove any legal necessity or that he does not
made reasonable enquiries, the sale is invalid. But the father in a joint Hindu
Family may sell or mortgage the joint family property including the sons'
interest therein to discharge a debt contracted by him for his own personal
benefit and such alienation binds the sons provided: (a) the debt was
antecedent to the alienation, and (b) it was not incurred for any immoral
purpose. (ii) "Antecedent" debt means antecedent in fact as well as
in time. The debt must be independent of and not part of the transactions
impeached.
The debt may be a deb; incurred In connection
with a trade started by the father. The father alone can alienate the sons'
share in the case of joint family. The privilege of alienating the whole of
joint family property for payment of an antecedent debt is a privilege only of
the father, grandfather and great grandfather qua the son or grandson only. No
other person has any such privilege. [134 H-135 B, D-E] Sidheshwar Mukherjee v.
Bhubneshwar Prasad Narain Singh and Ors. [1954] SCR 177; Brij Narain v. Mangla
Prasad and ors, L.R. 51 I.A. 129. Shanmukam v. Nachu Ammal A.I.R.
(1937) Mad. 140; Dudh Nath v. Sat Narain Ram
A.I.R. (1966) All. 315, referred to.
114 The validity of an alienation made to
discharge an antecedent debt rests upon the pious duty of the son to discharge
his father's debt not tainted with immorality.
[135 C]
CIVIL APPELLATE JURISDICTION : Civil Appeal
Nos. 1102- 1103 of 1970.
Appeals by certificate from the judgment and
Decree dated 6th November, 1968 of the Madras High Court in A. S.
Nos. 534 of 1961 and 165 of 1962.
T.S. Krishnamurthy Iyer, Gopal Subramaniam
and Mrs. Gopala krishnan for the Appellants.
Vepa P. Sarathy, Naresh Sharma and Vineet
Kumar for the Respondents.
The Judgment of the Court was delivered by
MISRA J. The present appeals by certificate are directed against the judgment
dated 6th November, 1968 of the Madras High Court.
The dispute between the parties centres
around 48.70 acres of land, partly wet and partly dry in village Pichanur,
Gudiyattam Taluk, North Arcot District and one house in Gudiyattam town.
Admittedly the said properties belonged to one Varadayya Chetty. He had two
sons, K. V. Purushotham and K. V. Sriramalu. K.V. Purushotham in his turn had
four sons while K.V. Sriramulu had three sons. They constituted a joint Hindu
family. The family owned and possessed 48.70 acres of land and three houses.
Vara dayya Chetty died about 30 years prior to the institution of the suits
giving rise to these appeals. At the time of his death his eldest son K. V.
Purushotham was the only adult male member, the other son, K.V. Sriramulu being
only 4-5 years old. Purushotham thus came into the sole management of the
entire family affairs and he brought up his younger brother Sriramalu. Their
ancestral family business (Kulachera) was that of tobacco and money lending.
It appears that immediately after the second
world war Purushotham started a new business of lungi. In connection with his
new venture he borrowed money from others either on promissory notes or on the
security of the family properties. He, however, suffered loss in that business.
When his creditors began to press for imme-
115 diate discharge of the debts, K. V. Purushotham and his brother K.V.
Sriramalu on their behalf and on behalf of other minors in the family entered into
an agreement on 7th July, 1955 with V. Govindaswami Mudaliar and V. Nataraja
Mudaliar, sons of Vadinankuppam Venugopala Mudaliar. This agreement was
evidenced by a writing, Ext. 4. Under the agreement K. V. Purushotham and K.V.
Sriramulu were to sell their entire property, except one acre of land, and a
house, to Mudaliar brothers for a sum of Rs. 14,000 to discharge their debts.
They received a sum of Rs. 500 by way of advance and the balance of Rs. 13,500
was to be paid within two months. It was further stipulated that in case the
vendees defaulted they would lose the advance money, on the other hand if the
vendors defaulted they would have to pay to the vendees a liquidated damage of
Rs. 2000.
Pursuant to the aforesaid agreement, a sale
deed was executed on 22nd of August, 1955 marked Ext. B-5 for an enhanced
consideration of Rs. 16,500. The sale deed referred to various debts owed by
the vendors which were to be discharged by the vendees and the balance, if any,
was to be paid to the vendors. The recital in the sale deed indicates that Rs.
250 was paid in cash to the vendors at the time of the execution of the sale
deed. The sale deed further recites that the vendors have not shown the exact
amount of debts which the vendees have agreed to pay. The amounts specified
therein are only approximate. The sale deed further authorised the vendees to
discharge the mortgage debts mentioned in the sale deed in the first instance,
if they had no sufficient funds to clear off all the debts at one time and
clear off the ordinary debts later.
The validity of the aforesaid sale deed, Ext.
B-5 dated 22nd August, 1955 and a mortgage deed Ext. B-49 in favour of A. M.
Vasudeva Mudaliar had been challenged by the sons of K.V. Purushotham and K.V.
Sriramalu respectively by two suits: Suit No. 107 of 1958 and Suit No. 108 of
1958. There was yet another suit by one of the creditors, M.V. Chinnappa
Mudaliar for annulment of the said sale. As mentioned earlier, the original
sui: No.107 of 1958 was filed by the four sons of Purushotham impleading
Purushotham and Sriramulu as defendants Nos. 1 and 2 and three minor sons of
Sriramulu as defendants Nos. 3 to 5 under the guardianship of their mother; V.
Govindaswami Mudaliar, V. Shanmugha Mudaliar, and V. Nataraja Mudaliar, the three
vendees as defendants Nos. 6 to 8 in suit No. 107 of 1958 and defendants Nos. 8
to 10 in suit No. 108 of 1958; A.M.
Vasudeva Mudaliar, defendant No. 9 116 and
the official Receiver of the North Arcot District as defendant No. 10.
Suit No. 108 of 1958 was filed by the three
minor sons of Sriramulu. The plaintiffs and other defendants of original suit
No. 107 of 1958 were impleaded as defendants in this suit. The relief claimed
in these suits was for partition after setting aside the sale deed dated 22nd of
August, 1955, Ext. B-5 and the mortgage deed Ext. B-40 in favour of A.M.
Vasudevan Mudaliar. The allegations in the plaint of the two suits are on the
same pattern. It will, therefore, suffice to refer to the allegations made in
suit No. 107 of 1958.
It is alleged in the plaint that the
ancestral property of the family consisted of 48 acres and 70 cents of land and
three houses detailed in Schedules and to the plaint. The said land fell in two
blocks, one consisting of 43 acres, 21 cents and the other of 5 acres 49 cents.
There were two wells in the first block and one well in the second block.
There were two pump-sets with electric motors
installed in the two wells in the first block at a cost of Rs. 3000 each.
The net cultivation yield from the land in
any case would not be less than Rs. 6000 per year which was more than
sufficient for the maintenance of the family leaving even some surplus. The
father of the plaintiffs started a new business of lungi which was not the
business 'Kulachara' of the family. In connection with the new venture he had
to borrow large sums of money either on promissory notes or on the security of
the aforesaid property. In course of the said business Purushotham sustained a
heavy loss. When the mortgagees and unsecured creditors started pressing for
immediate discharge of the debts, defendants 6 to 8, who happened to be friends
of Purushotham, induced him to create a nominal sale of the house and the
entire land, except an acre, in order to stave off the immediate pressure.
Purushotham seemed to have fallen in with the
idea and consequently executed first an agreement to sell and then a registered
sale deed dated 22nd of August, 1955 for a nominal consideration of Rs. 16,500
in respect of the entire land in Schedule with electric pump sets, with the
exception of one acre, and a house which is item No. 1 of Schedule C.
Defendants 6 to 8 represented that they would
execute a formal deed of reconveyance of the properties after the pressure from
creditors was staved off. The sale deed was not supported by consideration and
even recited consideration Rs. 16,500 was grossly inadequate and extremely low
consi- 117 dering the extent of land and the house and their market A value.
The entire joint family property was not worth less than Rs. 35,000 and its
annual yield was worth more than Rs.
6,000. The house mentioned at item No. l of
Schedule was also worth Rs. 5,000 though the consideration for the same in the
sale deed was only Rs. 2,000. Defendants l and 2 continued in possession of the
properties sold, for about a year when suddenly defendants Nos 6 to 8 conceived
the idea of defrauding the defendants I and 2 and by force and violence
trespassed upon the lands and took forcible and unlawful possession thereof
along with the standing crops worth Rs. 6,000 Defendants 1 and 2 were, however,
still in possession and enjoyment of the house mentioned in item No. 1 of
Schedule C. Defendants 6 to 8 were bound to deliver the possession of the land
to the plaintiffs and defendants l to S together with the mesne profits from
June 1 956, the date of trespass.
It was further alleged that except the two
mortgages mentioned in the sale deed the other debts shown as consideration
were false and fictitious. Even the said mortgages were paid by defendants 6 to
8 out of the standing crops. There was absolutely no necessity for borrowing
the large sums considering the large income from the joint family properties.
Even if the alleged debt due on the promissory note executed by defendant No. I
in favour of the 9th defendant was true, it was not binding on the plaintiffs
to the extent of the cash consideration as it was not for necessity. Defendant
No. 2 joined the execution of sale deed and the mortgage deed at the behest of
the 1st defendant and on misrepresentations made by defendants Nos. 6 to 8 and
in fact he had not derived any benefit from the borrowings. As M.V. Chinnappa
Mudaliar had filed a petition against Purushotham, being insolvency petition
No. 20 of 1955, and Purushotham was adjudged insolvent so the official Receiver
was impleaded as a defendant in this case.
The third suit being suit No. 4 of 1960 was
filed by M.V. Chinnappa Mudaliar, a creditor of defendants K.V. Purushotham and
K.V. Sriramulu against the vendees V. Govindaswami Mudaliar and his two
brothers arrayed as defendants I to 3. He first filed an insolvency petition in
which Purushotham was adjudged as insolvent. The said creditor had approached
the official Receiver for filing a suit for the annulment of the said sale but
as official Receive} demanded a lot of expenses he, therefore, sought the
permission of the Insolvency Court to file suit No. 4 of 1960 himself 118 fora
declaration that the sale deed dated 22nd of August, 1955 executed by
Purushotham in favour of vendees was void or voidable at the instance of the
creditors of Purushotham and for annulment of the same. According to him
Purushotham had borrowed a sum of Rs. 1000 from him and had executed a bond for
that amount on 17th September, 1947 carrying interest at 13 annas per cent per
mensem. Barring some payments a substantial amount was still due from him as
principal and on account of interest in the middle of 1955.
Purushotham, however, executed a sham,
nominal and fraudulent sale deed dated 22nd August, 1955 in respect of almost
all the family properties in favour of the defendants Nos. 1 to 3 with an
intent to defeat and delay his creditors, including the plaintiff. It was also
pleaded that property worth Rs. 50,000 was alienated for a nominal price
obviously for discharge of fictitious debts. So, the plaintiff claimed a relief
under section 53 of the Transfer of Property Act.
The claim of the plaintiffs in all the three
suits was resisted by the transferees. In substance their defence was that the
alienation by Purushotham was for payment of antecedent debts which were
untainted by illegality or immorality; that the father under the Hindu law
possessed a special power to alienate joint family property including the
shares of his sons for payment of his own debts not incurred for immoral or
illegal purposes; that in exercise of that power he had sold all his interest
and the interest of his minor sons, that d registered agreement of sale was
entered into on 7th of July 1955 and the period of two months was provided for
the performance of the contract and the vendees had investigated before
entering into the transaction; that the transaction was normal, regular and
bona fide one; that the vendees had in fact paid off the full consideration
applying it for discharge of antecedent debts obtaining from several creditors
vouchers for such due payment and cancellation. A.M. Vasudevan Mudaliar who had
been arrayed as defendant No. 9 in suit No. 107 and as defendant No. 7 in suit
No. 108 of 1958 resisted the claim of the plaintiffs in those suits on the
ground that the mortgage in his favour was incurred for the discharge of
antecedent debts and for the need of the Hindu family, which was binding upon
the members of the family. The plaintiffs in both the suits Nos. 107 and 108 of
1958, the sons of the vendors, were bound by the said alienation.
119 The pleadings of the parties gave rise to
a number of issues. Some of the issues were common in all the three suits. On
the request of the parties all the three suits were jointly tried.
Before the trial commenced a joint memo was
filed in original suit No. 4 of 1960 whereby the parties agreed that the
evidence in original suit No. 4 of 1960 regarding lack of consideration for the
sale deed dated 22nd of August, l 955 and the value of the properties, be
treated as evidence in original suit Nos. 107 and 108 of 1958. They also agreed
that the evidence regarding the mortgage deed dated 2nd of March 1952 be
treated as common evidence for original suit Nos. 107 and 108 of 1958 After
this statement by the counsel for the parties, the original issues framed in
the three suits were recast and additional issues were also framed.
The Subordinate Judge came to the following
conclusions in suit No. 4 of 1960:
(1) At the time of execution of the sale
deed. Ext. B- S, the fourth defendant, that is Purushotham, owed some creditors
in whose favour he had executed Exts. A-3, A-4, A-12, A-13 and the bond debts
involved in Exts. A-7 to A-11, but no provision had at all been made for those
creditors either in the agreement of 3 sale Exts. B. 4 dated 7th of July, 1955
or in Ext. B-5, the sale deed dated 22nd of August, 1955.
(2) Ext. B-54, the letter written by
Purushotham in favour of Veerasami Naidu dated 27th of July, 1')55 along with
other oral evidence clearly establishes the intention of Purushotham to defeat
and delay the claim of some of the creditors in screening his property by a
nominal sale in favour of defendants I to 3.
(3) The ingredients of section 53 (1) of the
Transfer of Property Act have been satisfied by the plaintiff in as ( much as
impugned transfers have been made with intent to defeat or delay the creditors
of the transferor. The Court, however, came to the conclusion that the suit was
wrongly framed inasmuch as the plaintiff did not seek any relief on behalf of
or for the benefit of all the creditors and, therefore, the Court decreed the
suit No. 4 of 1960 as against defendants 1 120 to 3, that is, alienees
annulling the sale transaction dated 22nd August, 1955 as fraudulent preference
under section 54 of the Provincial Insolvency Act, insofar as the insolvent's
share was concerned His conclusions in suit Nos. 107 and 108 of 1958 were as
follows:
(1) The value of the land and house including
the pump sets, wells etc. comprised in Ext. B-S could have been in August 1955
worth anywhere between Rs. 35,000 to Rs. 35,000 but the same had been sold at a
grossly low and inadequate price of Rs. 16,500.
(2) Purushotham and Sriramulu with the help
of Shri Rangaswami, who was their friend, approached the vendees for help and
on their suggestion they agreed to execute a nominal sale of all their
properties with an understanding for reconveyance after ten years on payment of
the sums advanced by them and that in that connection they had thought of
executing the two bogus bonds, one in favour of Veeraswami Naidu, DW 12, and
another in favour of Deivasigamani Mudaliar, DW 3 and certain other documents
to make the sale probable.
(3) The sale dated 22nd August, 1955 is true
and it is supported by consideration but only partly. It is, however, liable to
be set aside wholly as an imprudent transaction.
(4) The mortgage deed dated 2nd of March 1952
is true and binding only so far as shares of K.V.
Purushotham and Sriramulu are concerned and
to the extent of Rs. 2000 so far as the plaintiffs in original suit No. 107 of
1958 are concerned.
(5) The alienness under the sale transaction
dated 22nd of August 1955 are not entitled to any equities in this suit. But
the alinee under Ext. B. 49 would be entitled to have his two items of house
allotted to the share of K.V. Purushotham and K.V. Sriramulu to work out his
equities but this will be easily done in the final 121 decree proceedings in
original suit No. 107 of 1958 A and 108 of 1958.
(6) The plaintiffs would be entitled to past
profits from the alienees of the sale transaction dated 22nd of August, 1955
from the year 1956-57 as it is in evidence that they entered possession in that
year. B on these findings the Subordinate Judge passed a preliminary decree for
partition and division of their respective shares in suit Nos. 107 of 1958 and
108 of 1958 which was 215th and 318th respectively in both the suits after
setting aside the sale transaction dated 22nd of August, 1955 and directing the
alienees to work out their remedies outside the scope of these suits and
declaring that the alienation dated 2nd March, 1952 was binding only on the
shares of K.V. Purushotham and K.V. Sriramulu and to the extent of Rs. 2000.
The plaintiffs were held entitled to a decree for past profits from 1556-57 as
against the alienees of the sale transaction dated 22nd August 1955, the
quantum to be determined in a separate enquiry in the final decree proceedings
as was agreed to by the parties under order 20, rule 12 C.P.C. The court
declined to give any relief to the alienees even in respect of the amount
actually paid by them to discharge some of the debts incurred by Purushotham on
the ground that the transaction has been vitiated by fraud.
The alienees-defendants feeling aggrieved by
the judgment and decree of the Subordinate Judge preferred appeals in all the
three suits. The mortgagee Vasudevan Mudaliar, however, submitted to the
judgment and decree and did not prefer any appeal presumably because he could
realise the amount due to him by virtue of the decree granted to him. The High
Court was, therefore, concerned only with the validity of the sale deed Ext.
B-S in favour of the appellants.
The High Court reversed the findings of the
trial court in suits Nos. 107 and 108 of 1958 and set aside the decree passed
by the Subordinate Judge but confirmed the finding and decree in suit No. 4 of
1960. The High Court came to the conclusion that the purchase of the suit land
under Ext. B-5 was for a reasonable price and the consideration of Rs. 16,500
mentioned in Ext. B-S was not a grossly low price.
The lungi business started by Purushotham was
new a venture of Purushotham and not his family business. His father had only a
tobacco and money-lending business. The genuine 122 debts mentioned in Ext. B-5
were antecedent debts from the point of view of the plaintiffs in original suit
No. 107 of 1958. Therefore, they are binding on them. As the debts evidenced by
Ext. B-13 and B-14 were genuine debts the alienation, Ext. B-5, is clearly binding
on the plaintiffs in original suit No. 107 of 1958 as the sale deed was
executed by their father in discharge of antecedent debts.
The alienation under Ext. B-S can be
supported not only against the plaintiffs in original suit No. 107 of 1958 but
also against the plaintiffs in original suit No. 108 of 1958 as it was made in
discharge of antecedent debts of their respective fathers.
On these findings the High Court allowed the
appeals filed by the alienees in suit Nos. 107 and 108 of 1955 but dismissed
the appeal filed in suit No. 4 of 1960. The plaintiffs have now come in appeal
to challenge the judgement of the High Court.
The contention raised on behalf of the
appellants is that the High Court has omitted to take into consideration
various circumstances which had been taken into consideration by the trial
court and as such the findings of the High Court on material issues are
vitiated. The High Court further omitted to consider whether the impugned sale
was an imprudent transaction, if not fictitious. The counsel for the
respondents, on the other hand has contended that the findings recorded by the
High Court are pure findings of fact based on appraisal of evidence and this
Court cannot reverse the findings recorded by the last court of facts. We have
to consider the findings of the High Court in the light of the contentions
raised by the parties.
The question for consideration in these
appeals is about the genuineness of the sale deed Ext. B-5 dated 22nd of
August, 1955 executed by Purushotham and Sriramulu in favour of respondents I
to 3. As stated earlier the sale deed was challenged by the plaintiffs on
grounds: (a) that it was executed only nominally for a collateral purpose and
with a view to stave off creditors with the express understanding that the
properties sold would be re-conveyed to the vendors after the pressure of the
creditors had subdued; (b) that even the recited consideration in the impugned
sale deed was grossly inadequate; (c) that the debts under the promissory notes
Ext.B-13 in favour of Veeraswami Naidu and Ext. B-14 in favour of Deivasigamani
Mudaliar were fictitious.
The burden squarely lay on the vendees to
prove that the impugned sale deed was valid and binding on the plaintiffs and
123 their respective shares. To discharge this burden the vendees have A
produced both oral and documentary evidence.
The vendors have also produced both oral and
documentary evidence in support of their case.
Before dealing with the oral evidence of the
parties in detail, it is pertinent to refer to Ext. B-54 which is the most
important document supporting the vendors. This is an inland letter dated ''7th
of July, 1955 written by K.V. Purushotham in Telugu to Veeraswami Naidu. If
this letter is proved to be genuine it will give a death blow to the case of
the vendees. This letter has been relied upon by the trial court but has been
discarded by the High Court. As this letter is a revealing one it will be
appropriate to quote the letter in extenso.
"Gudiyattam, 27.7.55 Letter written by
Gudiyattam K.V. Purushotham with salutations to elder brother Sri B. Veeraswami
Naidu of Mathangal village. Here all are keeping good health with your
blessings. Please write to me your and your children's welfare.
In respect of the debts due to the creditors
by me here, I and your son-in-law T.G. Rangaswami Naidu went to see Vaithana
Kuppam Venugopala Mudali and his sons V. Govindaswami Mudali and brothers and
had a talk with them in respect of the debts due by me. They said to us that I
should execute a sale deed in respect of my properties in their favour and that
after the creditors demands (troubles? subside the amount that they would be
giving us shall be repaid within a period of 10 years and that on such
repayment they would reconvey property conveyed in their favour. As all of us
have desired I and my younger brother entered into an agreement on 7.7.1955
agreeing to execute a deed of sale in pursuance of the talk we had.
Sale deed remains to be executed. In this
connection (regard) I and my younger brother both have to create some nominal
bonds fixing up to some dates and then set up as though these bonds were
cancelled on payments 124 being made by those persons and that those items
might be recited in the sale deed to be executed. For resorting to this, we all
decided and fixed you up as one such (person) in whose favour bonds have to be
drawn up to a fixed date.
If such bonds are drawn up in favour of
respectable persons like you and if all of us join together, then the other
creditors cannot do anything. As you are a trusted person these could be done
in your favour as stated. They have agreed to give us great help in this
matter. Further he is a very good friend of us. If the amount to which they are
entitled to, is paid back within 10 years, without , fail, then they will
reconvey by way of deed of sale in " our favour. They will not fail in
their words. All of us have decided that a bond should be executed in your
favour nominally fixing up to a particular date for a sum of Rs.
2500. Thereafter on some other date you have
to make an endorsement of payment on the bond and return the bond after
cancelling the same. Further I and my younger brother have executed a nominal
bond for Rs. 1000 on 15.12.1954 in favour of C.R. Deivasigamani too i.e. his
junior paternal uncle viz., V. Govindaswami Mudali's mother's sister's husband.
Your son-in-law T.G. Rangaswami Naidu has
attested as a witness in that.
In respect of the bond in your favour, you
have to send a notice to us. V. Govindaswami Mudali, son of Venugopal Mudali
told me that such a notice is essential that should be on record to strengthen
the sale deed. Further, we are also told that you should write a letter to your
son-in-law T.G. Rangaswami Naidu asking him to make demands regarding the
amount due to you. The main reason for doing all these is to stop the trouble
given by the other creditors to whom I owe.
Therefore, with a view to meet you in person,
discuss and arrange regarding the aforesaid matter, I and your son- in-law T.G.
Rangaswami Naidu are going over to your village tomorrow. You will have no
difficulty in this matter.
Therefore, I request that you and your senior
son-in-law Raghavalu Naidu to remain in the house. We will inform you the rest
of the matters in person.
125 we request you to show faith or kindness
towards this poor family.
Thus with salutations. (in Telugu) Sd/- K.V.
Purushotham." The reasons which impelled the High Court to discard this
letter are as follows: (I) the author of this letter K.V. Purushotham did not
appear in the witness box; (2) the document does not come from a proper
custody; (3) there is no reason why the letter should have been sent from
Gudiyattam to Manthangal village when one could reach the latter village from
Gudiyattam within a short time by a bus or other conveyance; (4) the letter was
posted on 28th July, 1955 at 5 p.m. and reached its destination on 4th August
1955 as it appears to have detained at Ranipet in the interval then how did
they come to prepare Ext. B-20 and Ext. B-48 even on 30th July 1955; (5) in
Ext. B-54 Purushotham had expressed that he would be meeting D.W. 12,
Veeraswami Naidu, on the very next day and thus there was no real necessity to
write the letter Ext. B-54; (6) if Purushotham conspired with the son-in-law of
D.W. 12, Veeraswami Naidu to bring into existence fictitious promissory notes,
it is unlikely that they would announce it in the letter Ext. B-54 when they
were not sure of the attitude of D.W. 12, Veeraswami Naidu, unless they wanted
to create evidence for the purpose of the case; (7) there was no necessity for
Purushotham and Sriramulu to bring into existence fictitious promissory notes
in favour of D.W. 3, Deivasigamani and D.W. 12, Veeraswami Naidu, as they could
have easily mentioned the other undisputed debts owed by them to support the
recitals of consideration in the sale deed. The counsel for the respondents has
reiterated the same reasons for discarding Ext. B-54.
The first ground which weighed with the High
Court for discarding the letter Ext. B-54 is that the author of this letter
K.V. Purushotham did not appear in the witness box and the document does not
come to court from a proper custody. No such objection was raised no behalf of
the vendees in the trial court regarding the admissibility of the letter. The
evidence of D.W. 13 and D.W. 18 have clearly proved the handwriting of K.V.
Purushotham in Ext. B-54. The observation of the High Court that the letter
might have been written subsequently is conjectural one. No such case was even
set up by the vendees in the written statement or in the 126 evidence, Exhibit
B-54 is an inland letter bearing the postal stamps and it could not have been
fabricated.
A capita] has been made out of the delayed
delivery of the letter on 4th August, 1955. The letter was posted on 28th of
July, 1955 at 5 p.m. and it reached its destination on 4th of August, 1955. It
appears to have been detained at Ranipet in the interval. The High Court has
attached undue importance to the fact that if Ext. B. 54 reached the addressee
on 4th of August, 1955 then how did they come to prepare Exts. B-20 and B-48
even on the 30th of July. 1955.
The difficulty is solved if we keep in mind
the fact that in the last paragraph of the letter the addressee was informed
that they were all coming to meet him (D.W. 12) at his place the next day. If
in accordance with the recital of the letter Purushotham had reached the next
day, the 29th of July, 1955, there was nothing improbable in the preparation of
the two documents on 30th July, 1955.
There is a slight inconsistency in the
evidence of W. 12 when he says that only on the receipt of Ext. B-54 other
documents were prepared. But the evidence of D.W. 12, which otherwise appears
to be natural, cannot be discarded merely on this slight inconsistency.
The other reason which has appealed to the
High Court for believing Ext. B-54 is that if Purushotham was to meet
Veeraswami Naidu the very next day, then there was no real necessity to write
the letter Ext. B-54. It could not be expected that the letter would be so
unduly delayed and if Purushotham has taken precaution by writing a letter and
also by going to his place it cannot detract from p the value of Ext. B-54.
The observation of the High Court that there
was' no necessity for Purushotham and Sriramulu to bring into existence
fictitious promissory notes in favour of D.W. 3, Devasigamani and D.W. 12,
Veeraswami Naidu as they could have easily mentioned the; other undisputed
debts owed by them to support the recital of the consideration in the sale
deed, also does not hold good in as much as' there is ample evidence on the
record to warrant the conclusion that the promissory notes in favour of D.W. 3,
Devasigamani and D.W.
12, Veeraswami Naidu were fictitious. Most of
the debts have neither been referred to in the deed of agreement for sale nor
in the sale deed and it was purposely- done.
127 If the High Court had taken into
consideration the aforesaid tell- tale circumstances there would have been no
difficulty in accepting Ext. B-54 as genuine.
The circumstances which should have been
taken into consideration by the High Court before reversing the findings
recorded by the trial court are as follows.
In connection with the lungi business started
by K.V. Purushotham he had to borrow money from various creditors.
When the new business of lungi ended in loss
there was pressure from the creditors for the discharge of the debts.
k. V. Purushotham was thus in a tight corner.
As a prudent man, he would have liked to save his property to the extent he
possibly could and pay off the various debts incurred by him. Curiously enough
Purushotham and his brother. Stiramulu sold away the entire landed property of
about 47 acres and odd, leaving behind only an acre, and a house, owned by the
joint family for a paltry sum of Rs. 16,500. out of n the total consideration
of Rs. 16,500 the vendees were asked to discharge the various debts mentioned
in Ext. B-5, the sale deed. On an examination of the sale deed, Ext. B-S as
well as the deed of agreement Ext. B-4, it is a clear that all the debts
incurred by Purushotham were not shown in those deeds. Ext. B-4 detailed only
two mortgage debts while Ext.
B-S specified five items of debts. Admittedly
there were other debts also incurred by K.V. Purushotham. It passes one's
comprehension why would K V. Purushotham and his brother Sriramulu sell away
the entire landed property of 47 acres leaving behind only one acre, and a
house, without making a provision for the discharge of all the outstanding
debts. Not only that, there was a stipulation in the sale deed Ext. B-5 that
the vendees may first pay debts under the mortgage if the vendees had no money
to discharge all the debts at one and the same time and to clear off the
ordinary debts at a later date.
What was the earthly reason for executing the
sale deed of almost all the property owned by the family ? [f Purushotham
wanted to save his reputation by paying off all the creditors then there should
have been provision made for discharge of all the debts and at least they
should have been specified either in the agreement to sell or in the sale deed,
Ext. B-5. Admittedly there were other debts besides the debts specified in the
sale deed, Ext. B-5. K.V.
Purushotham owed to other creditors in whose
128 favour he had executed promissory notes Ext. A-3, A-4, A-12 and A-13, and
bond debts involved in Exts. A-7 to A-l l but these debts have not been shown
either in Ext. B-4 or Ext.
B-5 specially when the debts were to be
discharged by the vendees under the terms of the sale deed as part of the
consideration. If almost the entire property of the joint family was to be sold
for the discharge of his debts, and yet a substantial part of the debt remains
undischarged, there was no positive gain to the vendors in disposing of almost
the entire property of the joint family.
The stipulations in the sale deed that the
vendees might pay off only the secured debts and clear of the other ordinary
debts at their leisure itself indicates that there was no anxiety on the part
of the vendors to clear of all the debts. It does not stand to reason why
should the vendors adopt such an attitude. These circumstances speak for
themselves.
If we consider Ext. B-54 in the light of
these circumstances, the letter appears to be a sequel to what has been agreed
upon between K.V. Purushotham and the vendees or their father. Tho vendees
persuaded Purushotham to execute a sale deed of almost his entire family
property under the pretext of assistance to him with the stipulation that they
would re-convey the property to the vendors after the pressure from the
creditors was over. This can be the only reason why the vendors would agree to
dispose of the entire joint family property for a paltry consideration of Rs. 16,500
out of which only Rs. 500 by way of advance and Rs. 250 at the time of
execution of the sale went to the vendors according to the recital in the sale
deed itself. The balance of the sale consideration is alleged to have been used
by the vendees for paying off some of the creditors.
The attempt on behalf of the vendees has been
to show that they persuaded the creditors either to forgo the interest or to
reduce the principal amount and thus they had cleared off the dues of the
various creditors. In poof of this they tried to file the receipts and vouchers
from the creditors most of which have been attested by the vendees' own kith
and kin. Some of the documents which have been attested by these witnesses,
have been belied by D.W. 12 at least in respect of Ext. B-13. He clearly
admitted that Purushotham never borrowed any amount from him nor did he pay any
amount towards any loan to him. He has given the full account of how
Govindaswami Mudaliar and some other persons came to the mango thope of his
son-in-law and met him there. They asked him to sign the endorsement of
discharge in 129 Ext. B-13. At first he protested and refused but on the
assurance of other persons who were there he had to sign the document on their
persuasion on the ground that they were setting up these documents in
connection with a sale. The same position has been admitted by even Rangaswami
Naidu, D.W. 18.
It is true that purushotham, the author of
the letter himself has not come to the witness box but the letter has been
proved by the addressee himself, D.W. 12, Veeraswami Naidu. He also identified
Exts. B-48 and B-48 A, the two cards containing his signatures, one addressed
to K.V.
Purushotham and the other to his brother,
K.V. Sriramulu.
But he admitted that he had signed those
postcards without knowing their contents. This gives a clue how the vendees
have been out to get attestations of the endorsements of discharge from
creditors in respect of got up documents. The High Court has attached undue
importance to the fact that Ext. B-54 has not come to the Court from proper
custody, that is, it should have come to the court through Veeraswami Naidu but
instead it was produced by his son-in-law, D.W.
18. Keeping in view the relationship between
Veeraswami Naidu and his son-in-law, the production of the letter by his
son-in-law cannot be said to be from an improper custody. His two sons-in-law
have also appeared as witnesses as D. W. 13 and D.W. 18. D.W. 13, Rajavelu,
deposed that on the day Ext. B-54 was received by D.W. 12 he was present.
According to him on that day Govindaswami
Mudaliar and Purushotham came to their place and Purushotham informed
Veeraswami, his father-in-law that as a support for a sale deed they had got up
a bond in his favour. He dittoes what has been said by Veeraswami Naidu. The
other son-in-law, Rangaswami Naidu, D.W. 18, also appeared as witness. He owns
land adjacent to the suit land. He also deposed that the bond debt mentioned in
Ext. B-S in favour of D.W. 12 and the bond debt in favour of D.W. 3,
Deivasigamani were got up ones. He also identified Ext. B-54 as a letter
written by Purushotham to his father-in-law, Veeraswami Naidu.
The various other reasons given by the High
Court for recording Ext. B-54 are only flimsy and the circumstances enumerated
above make the letter Ext. B-54 a plausible and natural letter. An adverse
inference could have been drawn for non-appearance of Purushotham but the other
evidence in the circumstances in our opinion warrant the conclusions drawn by
the trial court and we choose to accept the findings of the trial court, 130
This leads us to the other oral and documentary evidence.
The vendees have produced seven witnesses
besides one of them as D.W. 1. Govindaswami Mudaliar, D.W. 1, has substantiated
the case set up by the vendees in their written statement He, however, for the
first time deposed that the family business of the vendors has been weaving and
lungi, although this was not their case even in the written statement. He
deposed that after the sale the vendees took possessions of the land and the
house and later on leased out the land to Deivasigamani vide Ext. B-37, on an
annual rent of Rs. 1400 and the house on a monthly rent of Rs. 12 vide Ext.
B-41 and that from the time of purchase the vendees have been paying the kists
and taxes for the land and the house.
The other Witnesses produced by the vendees
are Ratna Mudaliar, D.W. 2. Deivasigamani Mudaliar, D.W. 3, G. Rajan D.W. 4,
Govindappa Mudaliar, D.W. 2. Vasudevan Mudaliar, D.W. 6, Punyakoti Chettiar,
D.W. 7 and V C. Manivannan, D.W.
8. Ratna Mudaliar D.W. 2, lives only three
houses away from the house of Venugopal Mudaliar. He had attested Ext. B-4 and
Ext B-5 and also the endorsement of discharge in Exts.
B-9, B-14, B-15 and B-17. He had also
attested the endorsement in Ext. B-37 and Ext. B-41. It was suggested to him
that his signatures had been taken on the documents he had attested at a later
date. He denied this suggestion He could not, however, describe the
circumstances under which the endorsement to the discharge in Ext. B-9 come to
be written. He was so intimate with the vendees that he was asked to attest so
many documents but he evaded to reply the question whether Deivasiyamani was
employed in the shop of Govindaswanmi Mudaliar whether Deivasigamani himself
has admitted that he was in the service of D.W.1.
Deivasigamani Mudaliar, D.W. 3, has also
attested Ext.
B-5 and the endorsement of charge in Ext. 9
and Ext.B.13.
He is also an attestator of the endorsement
of discharge in Ext. B-13. He has admitted that he was related to D.W. 1, the
vendee, and also that he was in the service of Govindaswami Mudaliar five years
back as his Gumastha. He also admits that he had taken certain lands on lease
from the vendees. He appears to have been present on each and every crucial
occasion for attesting the documents. He being a close relation and also a
servant of defendant No. 1, he is bound to echo the voice of his master.
131 G. Rajan, D.W. 4, attested the
endorsement of discharge in A Ext. B-13, which was a promissory note executed
in favour of Veeraswami Naidu. He admitted in cross-examination that he used to
call on D.W. 1 off and on and he happens to be his friend. His evidence also
gives the impression that he has come to oblige D.W. 1.
Govindappa Mudaliar, D.W. 5, has attested
Exts. B-4 and B-5 and the endorsement of discharge of a bond Ext. B-9 to
Sambayya Chetty. He admitted that he was a regular visitor to the house of D.W.
1. He used to go there to read newspapers. He is also at the house of D.W. I on
crucial occasions reading newspapers.
Vasudevan Mudaliar, D.W. 6, has deposed that
K.V. Purushotham and K.V. Sriramulu had borrowed money from him in 1952 and
they had mortgaged a house and a vacant site under Ext. 49. Exhibit B-50 was a
prior promissory note executed by K.V. Purushotham. In renewal of that bond and
for a further advance of Rs. 2000 Ext. B-49 was executed for Rs. 4000. He in
his cross-examination that there were other big money lenders viz., M.A.
Govindaraju Chettiar, Managing Director of Rajeshwari Mills, Gudiyattam;
Motiyappa Mudaliar was also equally well-to-do man and had got money lending
business; Rajupatti Rajagopal Naidu and others. But K.V.
Purushotham had not borrowed any money from
any of those persons. He also admitted in the cross-examination that the value
of the land within the radius of five miles of Gudiyattam had risen in the
course of five or six years. He further deposed that his first cousin Vasudeva
Mudaliar had purchased six acres for Rs. 24,000 within two years. He did not
deny the suggestion that the transaction might be four years back. The
statement was made on 8th of August, 1961 and about four years back would take
ns to 1956-57.
Punyakoti Chettiar, D.W. 7 deposed that
Purushotham and his brother Sriramulu had borrowed Rs. 2500 from him and
executed a bond Ext. B-12. They had also executed Ext. B-16 for Rs. 200. He
further deposed that at the time of discharge of Exts. B-12 and B-16 three
persons had come to his place. They were Raju Jaicker. E.A. Ponnusami Mudaliar
and Venugopal Mudaliar. But in cross-examination he positively admitted that
neither Raju Mudaliar nor Devasigamani were present at the time of discharge
and attested the endorsement in Ext. B-12. In the 132 endorsement of discharge,
however, one Raju Naidu had attested. He, however, admitted in cross-examination
that Rangasami Naidu and Ponnusami Mudaliar alone were present at the time of
discharge of Ext. B-12 but neither Raju Mudaliar nor Deivasigamani Mudaliar,
who have attested Ext. B-12 were present at the time of discharge.
V.C. Manivannan, D.W. 8, is the Secretary of
the Land Mortgage Bank, Vellore. He speaks of the circumstances under which the
mortgage in favour of his bank was discharged.
According to him Venugopal Mudaliar, the
father of Govindaswami Mudaliar, come to the bank at the time of the discharge.
He enquired whether the penal interest could be given up. He represented that
remission, if any, made would enure to the benefit of Purushotham when he gets
resale. He also admitted that the valuation of the property was that of the
pre-war period and after the war prices had risen three to four times.
A scrutiny of the evidence produced on behalf
of the vendees reveals that the witnesses are interested in the vendees and
they are out to oblige them. In some cases it is even doubtful whether the
attesting witnesses were present at the time of attestation. The possibility of
obtaining their signature at a later date cannot be ruled out.
As against the evidence of the alienees, the
evidence supporting the vendors proves that the properties included in the sale
deed Ex. B-S were worth somewhere between Rs.
40,000 to Rs. 50,000. The village Munsif and
Karnam of Pichanur were examined as D.W. 10 and D.W. 17 respectively.
According to D.W. 10 the land belonging to
the vendors included in the sale deed has a total area of about 46 to 47 acres.
They are situated in two blocks, one block consisting of 42 acres and the other
block consisting of the balance.
Two electric pumps were existing in the block
of 42 acres.
He himself owns land adjacent to the suit
land owning about 40 acres. According to him, 20 acres out of 42 acres' block
were fit for wet cultivation viz., rabi, paddy, plantain and other wet crops
could be raised, while in the dry lands dry crops like red gram, groundnut,
horse gram etc. could be grown. He further deposed that in 1955-56 the 20 acres
in which wet crops could be raised was worth Rs. 1500 per acre while the land
in which dry crops could be raised was worth Rs. 300 to Rs. 400 per acre.
According to him it would cost Rs. 2500 or more to construct each well and Rs.
1000 or so to construct the pumping set shed. There 133 were about 300 and odd
palmyrah trees each of which would fetch Rs. 5 or so. Besides there were
tamarind and banian trees. One tamarind tree would fetch about Rs. 250 and are
banian tree would fetch about Rs. 100.
He further deposed that for about a year
after the sale the vendors alone continued to be in possession and thereafter
the vendees took forcible possession which resulted in a criminal complaint by
K.V. Purushotham. This witness is a Village Munsif and there is no reason to
doubt his veracity. He has got his own land near the land in suit.
The evidence of D.W. 17 is also to the same
effect. He is a fairly aged person and Karnam of Pichanur for the past 40 years.
The Trial Court has observed in its judgment that it was very much impressed by
the demeanour of this witness which impressed the court as a person speaking
the truth. He substantially supported the evidence of D.W. 10. Kupayya Naidu,
D.W. 11 is the lessee of defendants I to 3. He also supports the evidence of
D.W. 10 and D.W. 17 with regard to the valuation of the property.
D.W. 14 Channgayya Naidu, is the president of
the village Panchayat board. He is also an adjacent owner. He had purchased
land admeasuring two acres and odd in 1958 for Rs. 4000, Ext. 55 being the
registration copy of the sale deed. He also speaks of some purchase of 3 acres
and odd adjacent land in the name of his undivided brother vide Ext. B-56 in
1960 for Rs. 9000. He is very positive in saying that the land of the vendors
could be valued at Rs. 50,000 in 1955.
T.L. Narayanasami Chowdri D.W. 15 is the
Director of Gudiyattam Taluk Land Mortgage Bank. He stated that he had
purchased 25 to 30 acres of dry land for a sum of Rs. 56,500 under Ext. B-57 in
the year 196 in the name of his undivided brother. Under another sale deed Ext.
B-58 dated 19th of March 1958, 13 acres and odd were purchased by them for Rs. 26,000.
The land purchased under Ext. B-57 was situated only at a distance of one
furlong from the suit land and was similar to the suit land.
Anjaneyalu Naidu, D.W. 16, also owns land
adjacent to the land owned by the vendors. He also gave evidence with reference
to Exts. B-59, B-60 and B-61. Under Ext. B-59 dated 2nd June, ]953 he had
purchased 2.77 acres for Rs. 2500 under Ext. B-60 134 dated 14th February, 1957
he had purchased 2.27 acres for Rs. 3,500 and under Ext. B-61 dated 22nd June,
1960 he had purchased 3.27 acres for Rs. 7,000. All these lands according to
him were punja (dry) lands similar to the lands owned by the vendors. He
further deposed that in the year 1952-53 or so the fertile part of the disputed
land could fetch Rs. 1,500 to Rs. 2,000 while the punja (dry) lands could fetch
Rs. 750 to Rs. 1000 per acre.
From the aforesaid evidence it can easily be
concluded that the land comprised in Ext. B-5 was fertile land capable of
giving a net return of not less than Rs. 2000 to Rs. 2500 per year. In this
state of the evidence, we agree with the conclusion drawn by the Trial Court
that the property in dispute was worth Rs. 40,000 to Rs. 50,000 but it was sold
only for Rs. 16,500 which is an inordinately inadequate consideration.
From the evidence discussed above, both oral
and documentary and circumstantial, we in agreement with the trial court hold
that the sale deed dated 22nd of August, 1955 is true and it is supported by
consideration but only in part and that even the recited consideration in the
sale deed is thoroughly inadequate; that the sale deed was executed only
nominally for a collateral purpose and with a view to stave off creditors with
the express understanding that the properties sold would be reconveyed to the
vendors after the pressure of the creditors had subdued; that the debts under
the promissory notes Ext. B-13 in favour of Veeraswami Naidu and Ext. B-14 in
favour of Deivasigamani Mudaliar were fictitious.
The contention of the counsel for the
respondents that finding of fact cannot be interfered with by the Court has no
force as the finding is being reversed on the ground that material
circumstances have been ignored by the High Court.
In view of the finding arrived at there is m)
question of giving any equities to the vendees even if some of the amounts paid
by the vendees to some of the creditors of Purushotham were genuine. If the
transaction of sale is itself vitiated for the reasons given above, no relief
in equity could be granted to the vendees.
Now the question crops up about the pious
liability of the sons to discharge the antecedent doubts of the father.
The legal position under the Hindu law is
quite clear. A natural guardian of a Hindu minor has power in the management of
his estate to mortgage or sell any part thereof in case of necessity or for the
benefit 135 Of the estate. If the alienee does not prove any legal necessity A
or that he does not make reasonable enquiries, the sale is invalid.
But the father in a joint Hindu family may
sell or mortgage the joint family property including the sons' interest therein
to discharge a debt contacted by him for his own personal benefit and such
alienation binds the sons provided (a) the debt was antecedent to the
alienation and (b) it was not incurred for an immoral purpose. The validity of
an alienation made to discharge an antecedent debt rests upon the pious duty of
the son to discharge his father's debt not tainted with immorality.
"Antecedent debt" means antecedent
in fact as well as in time, that is to say, that the debt must be truly
independent of and not part of the transactions impeached.
The debt may be a debt incurred in connection
with a trade started by the father. The father alone can alienate the sons'
share in the case of a joint family. The privilege of alienating the whole of
the joint family property for payment of an antecedent debt is the privilege
only of the father, grandfather and great-grandfather qua the son or grandson
only. No other person has any such privilege. K V.
Purushotham had contracted the debt in
connection with his new personal business and to clear all those debts he had
executed the impugned sale deed. Obviously, therefore, the debt in question was
antecedent debt so far as his sons were concerned and, therefore, they were
under a pious obligation to pay off these debts. It was open to the father to
execute a sale deed in respect of the shares of his sons also unless it was
shown that the debt was tainted with immorality or was for an illegal purpose.
It is not the case of the sons of Purushotham that the debt was contracted for
an illegal or immoral purpose. Obviously the sale would be binding on the sons
of Purushotham. But the same is not the position with regard to the sons of his
brother, K.V. Sriramulu who were the plaintiffs in suit No. 108 of 1958. It has
been found as a fact that lungi business was the individual or private business
of Purushotham In view or the factual position it could not be said that
Sriramulu had alienated the joint family property in the capacity as a father
of his sons for discharging any antecedent debt incurred by him merely because
he has also joined Purushotham in executing the impugned sale. The share of the
sons of Sriramulu could not have been alienated by Purushotham for discharging
his antecedent debt.
136 In Sidheshwar Mukherjee v. Bhubneshwar
Prasad Narain Singh and ors.(l) this Court laid down the law in the following
terms:
"A person who has obtained a decree
against a member of a joint Hindu family for a debt due to him is entitled to
attach and sell the interest of his debtor in the joint family property, and if
the debt was not immoral or illegal, the interest of the judgment debtor's sons
also in the joint family property would pass to the purchaser by such sale even
though the judgment-debtor was not the Karta of the family and the family did
not consist of the father and sons only when the decree was obtained against
the father and the properties were sold. It is not necessary that the sons
should be made parties to the suit or the execution proceedings.
The rule laid down by the Privy Council in
Nanomi Babuasin's case(2) is not restricted in its application to cases where
the father was the head of the family and in that capacity could represent his
sons in the suit or execution proceedings, for subject to the right of the sons
to assert and prove that the debt contracted by their father was not such as
would be binding on them under the Hindu law, the father, even if he was not
the Karta could represent his sons as effectively in the sale or execution
proceedings as he could do if he was the Karta himself.
In Brij Narain v. Mangla Prasad and Ors.(3)
the Judicial Committee, upon a consideration of the authorities, laid down the
following propositions:
"( I ) The managing member of a joint
undivided estate cannot alienate or burden the estate qua manager except for
purchases of necessity; but (2) if he is the father, and other members are his
sons, he may by incurring debt, so long as it is not for an immoral purpose,
lay the estate open to be taken in execution proceedings 137 upon a decree for
payment of that debt. (3) If he purports to burden the estate by a mortgage,
then unless that mortgage is to discharge an antecedent debt, it would not bind
the estate. (4) Antecedent debt means antecedent in fact as well as in time,
that is to say, that the debt must be truly independent and not part of the
transaction impeached. (S) There is rule that this result is affected by the
question whether the father, who contracted the debt or burdens the estate, is
alive or dead." In Shanmukam v. Nachu Ammal(1) a Division Bench of the
Madras High Court laid down:
"The doctrine of pious obligation of a
son to pay his father's debts cannot be restricted to cases where father also
happens to be the manager. If this limitation was well founded it would also
follow that the father's power of disposing of the son's share for the
satisfaction of his own debts must be likewise limited. There cannot be any
justification for such limitation when it is remembered that the son's
obligation to pay his father's debts was under the original Smritis independent
of possession of assets of joint family property. It depends purely upon the
relationship of father and son. It is only by case law developed during the
early part of nineteenth century and by statute law in the Bombay Presidency
that the ' liability of the son for father's debts was limited to assets and to
joint family property. The true basis of the obligation therefore is the
relationship of father and son and not the accident of the father being the
manager of the joint Hindu family." There is, however, another condition
which must be satisfied before the son could be held liable, i.e., that the
father or the manager acted like a prudent man and did not sacrifice the
property for an inadequate consideration.
In Dudh Nath v. Sat Narain Ram a Full Bench
of the Allahabad High Court observed:
"In order to uphold an alienation of a
joint Hindu family property by the father or the manager it is not only
necessary to prove that there was legal necessity but 138 also that the father
or the father or the manager acted like a prudent men and did not sacrifice the
property for an inadequate consideration. A Hindu father or a manager of a
joint Hindu family is expected to act prudently. However great the necessity
may be, in the joint family property is sacrificed for an inadequate
consideration it would be highly imprudent transaction and it would be a case
where, though for necessity, the father or the guardian has not acted for the
benefit of the estate or the members of the joint Hindu family.
The father or the manager is not the sole
owner of the property. In fact until the partition takes place even his share
does not stand demarcated. The ownership vests in all the copartners taken
together as a unit.
The father and the manager, therefore, only
represent the copartners. Consequently the copartners stand bound by the act of
the father or the manager of the family only to the extent the act is prudent
or for the benefit of the copartners or the estate." In the instant case
on the finding arrived at that the consideration for the sale deed Ext. B-S was
thoroughly inadequate, the sale cannot be upheld.
For the reasons given above the appeals must
succeed.
They are accordingly allowed and the judgment
of the High Court dated 6th November, 1968 is set aside, and that of the trial
court is restored. In the circumstances of the case the parties should bear
their own costs.
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