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1931 Supreme(Mad) 191

IN THE HIGH COURT OF MADRAS
Peruri Appalaraju
Versus
Peruri Krishnamurthy and Ors.
Decided On : 19.08.1931

Inadequacy of consideration in a sale deed renders the transaction void.

Headnote:

Inadequate Consideration - Sale Deed - Chidambaram Chettiar v. Sami Aiyar [1907] 30 Mad. 6, Musaharsahu v. Hakim Lal A.I.R.1915 P.C.115, Mina Kumari Bibi v. Bijoy Singh Dudhuria A.I.R. 1916 P.C. 238 - The court discussed the inadequacy of consideration in the sale deed and referenced key legal provisions from Chidambaram Chettiar v. Sami Aiyar, Musaharsahu v. Hakim Lal, and Mina Kumari Bibi v. Bijoy Singh Dudhuria to support its decision.

Fact of the Case:

The plaintiff, who is the appellant, purchased certain properties a day before they were to be attached by defendant 1. The plaintiff paid an amount less than the actual value of the properties, leading to a dispute over the adequacy of consideration.

Finding of the Court:

The court found that the sale deed was executed with the view of defrauding and defeating the debt of defendant 1 by screening the property under the guise of a sale deed for inadequate consideration.

Issues: The main issue was whether the sale deed was for adequate consideration and whether the sale was wholly void.

Ratio Decidendi: The court held that where only a part of the consideration is a debt due to the creditor, but the rest of it is fictitious or there is inadequacy, then the whole transaction is void.

Final Decision: The court dismissed the appeal with costs and substituted a declaration that the plaintiff holds the position of a mortgagee under four documents, and defendant 1 will be entitled to sell the property subject to the right of the plaintiff on those four mortgages.

JUDGMENT

1. The plaintiff is the appellant before us. The facts out of which this appeal arises may be stated as follows: Defendant 1 is the natural son of the plaintiff, but adopted by his cousin. Defendant 1 obtained a decree on an unregistered mortgage bond which therefore operated as a mere money bond for a sum of Rs. 1,600 which now amounts to Rs. 3,000 in O. S. No. 141 of 1923. He applied for attachment of certain properties of defendants 2, 3 and 4 situated at Thetagunta. The attachment was ordered on 21st September 1927. But on 20th September, the preceding day, the properties whose attachment was sought were sold by Ex. A to the plaintiff for Rs. 9,000, The consideration for the sale deed consisted of (1) a sum of Rs. 4,931-1-9 due to the vendee on two mortgage documents dated 13th March 1922 and 8th December 1923, Exs. D and E-1; (2) Rs. 103-3-4 due on a promissory note to the vendee; (3) Rs. 3,800 intended for discharging (a) the debt due to the Rani of Tuni under a mortgage dated 5th March 1913, Ex. G, and (b) the debt due to China Talrazu and others under a mortgage deed dated 8th December 1923, and also (c) a decree debt due to one Malrazu Ramaswami who has also obtained attachments of some property in execution of the decree; lastly (4) Rs. 165-10-11 paid before the Registrar. There is no dispute about the genuineness of items 1 and 2.

2. As to item 3, the vendee as a matter of fact paid Rs. 4,387-4-0, that is, much more than Rs. 3,800 mentioned in the document. When the attachment sought by defendant 1 was effected a claim petition was filed by the vendee relying on the sale deed. This claim was inquired into by the District Munsif of Cocanada and it was dismissed: vide order, Ex. J. He held that the sale deed, Ex. A, was executed with the secret reservation of some interest in the lands to the judgment-debtors and therefore it is not prima facie a bona fide transaction. Hence this regular suit by the plaintiff. The Subordinate Judge of Cocanada who tried the suit dismissed the suit. The plaintiff files this appeal.

3. It may be observed that the real crux of the case lies in the question whether the sale deed, Ex. A, was for adequate consideration. Defendant 1 alleges that the property is worth Rs. 12,000, and there was actually an offer for that amount. But finally it was arranged between the plaintiff and the vendors to have a sale deed for Rs. 9,000 only, there being some kind of secret arrangement in favour of the debtors so that they may get the benefit of the difference between the full value and the value mentioned in the sale deed. The evidence on this matter consists of two transactions. One is an attempt to purchase by a retired Tahsildar, P. W. 2, Pandayala Gurumurthi. He says he was willing to purchase three-fourths of the lands for Rs. 7,500. His agent Atti China Venkatachalam gives evidence as D.W. 2. He says he settled the sale for Rs. 8,000. The discrepancy is only apparent because even P. W. 2 admits that D. W. 2 wrote to him recommending that the lands may be taken for Rs. 8,000. But the transaction fell through. P. W. 2 says that the whole extent of the land is 20 acres wet and 22 acres dry. This portion of his evidence seems to be inaccurate, because wo have got evidence in connexion with the second transaction, now to be referred to, that the extent of lands is 120 acres. The other transaction which is relied on in this case is that one Dantuluri Venkatanarasimharazu, D. W. 3, arranged for a purchase of these lands for Rs. 12,000. A stamped agreement was actually drafted, which is Ex. 1 in the case, but was not executed by the mother of defendants 2 and 3. This document shows that the lands in Thetagunta are 120 acres in extent. It is suggested that this Ex. 1 is really a fabrication to support defendant 1s case. We are unable to accept this suggestion. D. W. 3 is a Kshatriya gentleman getting an annual income of Rs. 4,000 from his lands and he is a Taluk Board member. He was private secretar




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