Suit by creditor for declaration of settlement deed as fraudulent.

This is an appeal by the plaintiff against the judgment and decree in A.S.No.26 of 1948 on the file of the District Court, Anantapur, which confirmed the decree of the District Munsif, Penukonda, in O.S.No.238 of 1946. Defendants 6 and 7 are brothers and they owned items 1 and 2 and a half share in item 3 as co-sharers, each being entitled to a moiety thereof. On 5th August, 1932, they executed a deed of gift Exhibit A-1 settling the said properties along with others on the plaintiff who is the daughter of the 7th defendant. At that time the 6th defendant was indebted to the 4th defendant under pronotes dated 15th March, 1932 and 25th July, 1932. On 20th July, 1935, the 6th defendant agreed to sell item 3 to the 4th defendant in discharge of the promissory note dated 25th July, 1932; and he having defaulted in executing a sale deed in pursuance of the agreement the 4th defendant filed O.S.No.78 of 1937 on the file of the District Munsif’s Court, Penukonda, for specific performance of the agreement and that was decreed with costs on 3rd March, 1937. In execution of this decree, a sale deed was executed by the Court in favour of the 4th defendant under Order 21, rule 34, Civil Procedure Code, and possession was also obtained under the sale deed. The 4th defendant then filed O.S.No.232 of 1938, District Munsif’s Court, Penukonda, for a declaration that the gift deed Exhibit A-1 was in fraud of creditors and not binding on them and that was decreed on 17th September, 1940. There was an appeal against that decree, A.S.No.161 of 1940, District Court, Anantapur, and there in the decree in O.S.No.232 of 1938 was confirmed;

“with the clarification that the decree does not affect the half share of Karnam Ramaswami (7th defendant) in the properties gifted, but only the half share of the 1st defendant (present 6th defendant).”

This decision was affirmed on appeal to the High Court in S.A.No.858 of 1942. The 4th defendant then applied in execution to recover the costs decreed in O.S No.78 of 1937 and in E.P.No.310 of 1943 items 1 and 2 were sold on 5th June, 1944 and purchased by the 3rd defendant. Thereupon, the appellant instituted the suit out of which the present appeal arises for establishing her title to items 1 to 3 on the basis of the gift deed Exhibit A-1. Both the Courts have held that by reason of the decree in O.S.No.232 of 1938 her title cannot prevail as against that of defendants 3 and 4 and dismissed her action. The plaintiff prefers this second appeal.

Mr.A. Bhujanga Rao, the learned Advocate for the appellant, urged that the decree in O.S.No.232 of 1938 declared Exhibit A-1 void only as against the creditors of the 6th defendant; that the right now claimed by the 4th defendant is not as a creditor of the 6th defendant, but as his transferee under an agreement dated 20th July, 1935 and perfected by conveyance in execution of the decree in O.S.No.78 of 1937, District Munsif’s Court, Penukonda, and that Exhibit A-1 is not void as against such a transferee. It was further contended that the Court sale of items 1 and 2 in execution of the decree in O.S.No.78 of 1937 could not confer greater rights than the transfer in pursuance of that decree in favour of the 4th defendant and that the 3rd defendant who is a purchaser of those items cannot set up his title as against the plaintiff as he is neither a creditor of the 6th defendant nor a transferee from him.

It is undoubted law that when a transfer is declared void as against creditors under section 53 of the Transfer of Property Act, the result is not to annul it altogether, but only to render it inoperative as against creditors and that too only to the extent necessary to satisfy their claims; and subject to their claims, the transaction is valid and enforceable. In Storey on "Equity of jurisprudence" section 371, the law is thus stated:

"A conveyance of this sort (it has been said, with great truth and force) is void only as against creditors; and then only to the extent