MA PWA MAY vs S. R. M. M. A. CHETTYAR FIRM (DEFENDANTS)

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1929 Supreme(SC) 70

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD ATKIN, SIR JOHN WALLIS, SIR GEORGE LOWNDES, AND SIR BINOD MITTER.
MA PWA MAY - Appellant
Versus
S. R. M. M. A. CHETTYAR FIRM (DEFENDANTS) - Respondents
On Appeal from the High Court at Rangoon.
Decided On : July 25. 1929.

Important Points

A transfer for adequate consideration to satisfy genuine debts is not a fraudulent preference under Section 53 of the Transfer of Property Act. Additionally, registration of an improperly stamped document is valid under Section 87 of the Registration Act if performed in good faith as a procedural error.

Subject

Civil Law - Property Law

Act Referred

ANDHRA PRADESH RULES FRAMED UNDER REGISTRATION ACT: S.87
STAMP ACT: S.37, S.35
TRANSFER OF PROPERTY ACT: S.53

Headnote

(A) Transfer of Property Act, 1882 - Section 53 - Fraudulent Transfer - Preference of Creditors - A transfer of immovable property made for adequate consideration to satisfy genuine debts is not voidable under Section 53, even if it prefers one creditor over another, provided the debtor does not retain a benefit for himself - The section applies to instruments that remove property from creditors to the benefit of the debtor, not to those that simply prefer one creditor to the detriment of another. (Paras 13-15)

(B) Indian Stamp Act, 1899 - Section 35 - Indian Registration Act, 1908 - Section 87 - Validity of Registration - Defect in Procedure vs. Lack of Jurisdiction - A mistake by a registering officer regarding the adequacy or description of stamps used on an instrument is a defect in procedure rather than a lack of jurisdiction - Registration effected in good faith despite such a defect is valid under Section 87 of the Registration Act, as the law intends to protect innocent parties from being deprived of property due to an error or inadvertence of a public officer. (Paras 21-25)

Facts of the case:
Mortgagees sought to enforce a mortgage over oil wells. The mortgagors were heavily indebted to other creditors. The competing creditors challenged the mortgage, alleging it was executed without consideration to defraud them and was invalidly registered because the instrument bore a court fee stamp instead of a revenue stamp at the time of registration.

Findings of Court:
The court found that the mortgage was executed for real consideration to satisfy genuine debts. Regarding the stamp, the court held that the use of an improper stamp was a procedural error and the registration performed in good faith by the officer was valid under the law.

Issues: (1) Whether a mortgage created to prefer one creditor over others is invalid under Section 53 of the Transfer of Property Act; (2) Whether the registration of an instrument is invalid if it was not duly stamped at the time of registration.

Ratio Decidendi: A debtor is entitled to prefer one creditor over another, and such a preference is not an instrument to defeat and delay creditors under Section 53 of the Transfer of Property Act if the transfer is for adequate consideration and the debtor retains no benefit. Furthermore, Section 87 of the Registration Act protects registrations made in good faith from procedural errors, including mistakes regarding stamp duty, distinguishing such errors from a total lack of jurisdiction (such as territorial jurisdiction or presentation by an unauthorized person).

Result: Appeal allowed.

Legal Category Hierarchy

Advocates:
Solicitor for appellants :J. E. Lambert. Solicitors for respondents: Bramall & Bramall.

Judgement

Appeal (No. 102 of 1928) from a decree of the High Court (July 15, 1927) modifying a decree of the District Judge of Magwe.

The suit was instituted by the appellants to enforce a mortgage dated March 13, 1924.

The questions arising upon the appeal were (1.) whether the mortgage was invalid under s. 53 of the Transfer of Property Act, 1882 ; and (2.) whether the registration of the mortgage was invalid, because when registered it was not duly stamped, as required by the Indian Stamp Act, 1899, s. 35.

The facts and the relevant statutory provisions appear from the judgment of the Judicial Committee.

Both Courts in India held that the registration having been effected in good faith it was valid under s. 87 of the Indian Registration Act, 1908, although the instrument was not duly stamped at that time.

The District Judge decreed the suit holding that though the mortgage was a preference of the mortgagees over other creditors of the mortgagors it was not invalid under s. 53 of the Transfer of Property Act.

Upon appeal to the High Court the learned judges (Heald and Mya Bu JJ.) were of the contrary opinion; accordingly they varied the decree to a simple money decree.

1929. June 27, 28. De Gruyther K.C. and Pennell for the appellants. The mortgage was not invalid under s. 53 of the Transfer of Property Act, even if its intention and effect were to prefer the mortgagees over other creditors Musahar Sahu v. Hakim Lal . (( 1915) L. R. 43 I. A. 104.) Both Courts in India held, following Sarada Nath Bhattacharya v. Gobinda Chandra Das (( 1919) 23 Cal.

W. N. 534.), that the registration was valid under s. 87 of the Registration Act.

Dunne K.C. and E. B. Raikes for the respondents. Upon the facts the High Court was justified in holding that the mortgage was not only a preference of one creditor, but a scheme for the purpose of defeating the other creditors, and therefore void under s. 53. But in any case the mortgage was not validly registered, and consequently could not be received in evidence. Sect. 35 of the Stamp Act, 1899, imperatively forbids the registration of an instrument which is not duly stamped. The registering officer therefore had no jurisdiction to register it, and s. 87 of the Registration Act cannot be invoked Mujibunnissa v. Abdul Rahim (( 1900) L. R. 28 I. A. 15.); Jambu Parshad v. Muhammad Aftab Ali Khan (( 1914) L. R. 42 I. A. 22.); Ma Shwe Mya v. Maung Ho Hnaung . (( 1922) L. R. 49 I. A. 395.) The decision in Sarada Naths case (( 1919) 23 Cal. W. N. 534.) was erroneous. The stamp used was not merely a stamp " of improper description" within the meaning of s. 38 of the Stamp Act Reference under s. 57 of Act II. of 1899 . (( 1901) I. L. R. 23 A. 213.) The Stamp Act has been amended twice since that decision without any alteration in the section.

De Gruyther K.C. in reply. The amount of the stamp was sufficient, the only defect being that the revenue stamp used had been surcharged for use for the payment of court fees. That being so the instrument was duly stamped within the meaning of s. 35 of the Stamp Act, since that Act recognizes only two descriptions of stamps—namely, adhesive stamps and impressed stamps Annapurnabai v.

Lakshman Bhikaji Vakharkar. (( 1894) I. L. R. 19 B. 145.) But in any case the requirement of s. 35 of the Stamp Act is a matter of procedure, and s. 87 of the Registration Act prevents an error made in good faith from vitiating the registration. The considerations in Sah Mukhun Lall Panday v. Sah Koondun Lall (( 1875) L. R. 2 I. A. 210, 216.) affirmed in Mohammed Ewaz v. Birj Lall (( 1877) L.

R. 4 I. A. 166, 176.) apply. The decisions of the Board relied on by the appellants all related to presentation by an authorized person, and different considerations apply to cases of that kind.

July 25. The judgment of their Lordships was delivered by

LORD ATKIN. This is an appeal from a decree of the High Court of Judicature at Rangoon. The plaintiffs are the mortgagees under a mortgage dated M