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1916 Supreme(Cal) 241
CALCUTTA HIGH COURT
Richardson, J., N.R. Chatterjea, J.
Aftabuddin Chowdhury, Administrator to the Estate of Late Durga Churn Mukherji - Appellant
Versus
Basanta Kumar Mukopadhyaya & Anr. BR Aftabuddin Chowdhury, Administrator to the Estate of Late Durga Churn Mukherjee @APPELLANT - Respondent
Decided On : 07-07-1916
Headnote:
Fraudulent Conveyance - Transfer of Property - Sections 53, 41 - The court examined the validity of conveyances made by a debtor to avoid liability under a pending decree. It held that a conveyance made with intent to defeat or delay creditors is voidable at the option of the creditors, even if the transferee paid full value. The court emphasized that knowledge of the fraudulent intention by the transferee, even without direct participation in the fraud, renders the transfer void. The court also discussed the distinction between a transferee who is a creditor and one who is not, highlighting that a creditor accepting a transfer in satisfaction of a debt, even with knowledge of the transferor's fraudulent intent, may be considered a bona fide transferee.
Fact of the Case:
A debtor, facing a pending decree for accounts, executed several conveyances of his property to various individuals. The decree-holder challenged these conveyances as fraudulent, claiming they were intended to defeat his claim. The court examined the validity of each conveyance, considering the knowledge of the transferees, the consideration paid, and the intent of the debtor.
Finding of the Court:
The court found that the debtor's conveyances were made with the intent to defeat or delay his creditors. It held that the transferee who purchased the property with full knowledge of the debtor's fraudulent intention could not be considered a bona fide purchaser, even if he paid full value. The court also found that the consideration for some of the conveyances was not satisfactorily proven.
Issues: The main issue was whether the conveyances made by the debtor were valid against the decree-holder. The court had to determine if the transferees were bona fide purchasers for value without notice of the debtor's fraudulent intent.
Ratio Decidendi: The court applied Section 53 of the Transfer of Property Act, which states that a transfer made with intent to defeat or delay creditors is voidable at the option of the creditors. The court held that even if the transferee paid full value, knowledge of the fraudulent intention by the transferee renders the transfer void. The court also considered the distinction between a transferee who is a creditor and one who is not, applying the principle that a creditor accepting a transfer in satisfaction of a debt, even with knowledge of the transferor's fraudulent intent, may be considered a bona fide transferee.
Final Decision: The court declared the conveyances in favor of the transferee who had knowledge of the debtor's fraudulent intention to be void against the decree-holder. The court remanded the case for further inquiry into the debtor's assets at the time of the conveyances to determine if they were sufficient to meet the decree-holder's claim. The court dismissed the appeals relating to the other transferees, finding that there was no direct evidence of their knowledge of the debtor's fraudulent intent.
JUDGMENT
1. The facts of the cases which gave rise to these appeals may be stated shortly as follows:
2. One Durga Charan Mookherjee died in 1898, leaving his son Madhu Sudhan an infant. Bistoo Charan brother of Durga Charan was appointed guardian under Act VIII of 1890 in respect of the properties of the minor on the 20th February 1900 and one Sarat Chandra Ray and three others' executed a security bond on the 13th June 1900 as sureties for Bistoo Charan. The order appointing Bistoo Charan as guardian was, however, set aside on appeal by the High Court on the 28th January 1902, and on the 23rd August 1904, one Rajani Kanta was appointed administrator of the estate. On the 27th January 1905, he brought a suit for accounts for the period of Bistoo Charan's management claiming Rs. 12,000 and odd and the sureties Sarat Chandra Ray and others were made defendants along with Bistoo Charan, After filing the suit application was made for attachment before judgment of the properties of Sarat Chandra, and on the 28th April 1905 conditional order for attachment was passed and the order was served OM the 9th May 1905. On the 19th May 1905, objection to attachment was made by Bistoo Charan and on the same day Sarat Chandra filed an affidavit stating that he was not going, to alienate any property. On the 22nd May 1905, the conditional order for attachment was withdrawn. On the 12th January 1906, a fresh order for attachment before judgment was issued and served between the 19th and the 25th February 1906. A preliminary decree for accounts was passed on the 9th February 1906, and a final decree was passed on the 16th March 1909 for Rs. 10,867-8-4 in favour of Aftabuddin who had succeeded Rajani Kanta as administrator of the estate against Bistoo Charan and Sarat Chandra and the other sureties. While the said suit; was pending Sarat Chandra executed six conveyances in favour of certain: persons in respect of some of his properties. Two: of these were executed in favour of Basanta Kumar Mukerjee, one dated the 29th September 1905 and the other dated the 25th December 1905. Two others were exgeuted in favour of one Dewan Das, one of which dated the 31st December 1905 was in his own name and the other dated the 25th February 1906 in the name of his son Gour Das. Another Kobala dated the 14th February 1906 was; executed in favour of one Shamsere Ally, and lastly there was a Kobala in favour of one Nanda Kumar on the 25th February 1906. After the final decree was passed in the account suit, the decree-holder applied for execution of the decree against Sarat Chandra and attached his properties. Thereupon Basanta Kumar Mookherjee and the other purchasers preferred claims to the propertiea attached on the strength of the Kobalas executed in their favour. The claims of Shamsere Ally, Gour Das and Nanda Kumar were disallowed, but the claims of Basanta Kumar and Dewan Das were allowed on the 31st January 1910.
3. The decree-holder; thereupon brought a suit No; 160 of 1910 for a declaration that the purchase by Basanta Kumar was fraudulent, collusive and benami and that no title passed to him under the Kobalas. The suit was dismissed by the Court below and appeal No. 86 of 1911 has been preferred in that suit, A similar suit brought against Dewan Das (Suit No. 161 of 1910) waa also dismissed and Appeal1 No. 269 of 1911 is against the decision in that suit. The suit (No. 53 of 1910) brought by Shamsere Ally was decreed, and Appeal No. 268 of 1911 arises out of that suit. The suit brought by Nanda Kumar was dismissed and no appeal has been preferred by him. The suit by Dewan Das upon the Kobala in the name of Gour Das (Suit No. 53 of 1911) was also dismissed by the Court below and Second Appeal No. 2918 arises from that suit: We will first deal with Appeal No. 86 of 1911 which arises1 out of Suit No. 160 of 1910, in which Basanta Kumar Mookberjee is the contesting defendant. It appears that the most: valuable of the properties belonging to Sarat Chandra was
