1928 Supreme(Mad) 53
IN THE HIGH COURT OF MADRAS
Kumaraswami Sastri, J.
R.M. Nagarathna Mudaliar And Ors.
Versus
S.M. Chidambaram Chettiar And ...
Decided On : 1 February, 1928
Headnote:
specific performance - contract - Section 53, T. P. Act, Section 54, Prov. Ins. Act - 53, 54 - The court discussed the applicability of Section 53 of the Transfer of Property Act and Section 54 of the Provincial Insolvency Act. It found that the transaction was not a fraudulent transfer and did not fall within the scope of either provision. The court held that the contract was enforceable and directed the defendants to convey the lands to the plaintiffs within two months.
Fact of the Case:
The plaintiffs filed a suit for specific performance against the defendants, claiming that the defendants executed a promissory note and an agreement to sell land in consideration of a sum of Rs. 35,000. The defendants contended that the transaction was not binding due to lack of consideration and alleged fraudulent alteration and intention to defraud creditors.
Finding of the Court:
The court found that there was full consideration for the transaction and that it was not a fraudulent transfer. It held that the contract was enforceable and directed the defendants to convey the lands to the plaintiffs within two months.
Issues: The issues revolved around the validity of the transaction, including the consideration, alleged fraudulent alteration, and intention to defraud creditors.
Ratio Decidendi: The court determined that the transaction was not a fraudulent transfer and did not fall within the scope of Section 53 of the Transfer of Property Act or Section 54 of the Provincial Insolvency Act. It held that the contract was enforceable and directed the defendants to convey the lands to the plaintiffs within two months.
Final Decision: The court set aside the lower court's decree and directed the defendants to convey the lands to the plaintiffs within two months. Costs were to be paid by the Official Receiver and defendant 5 personally.
Kumaraswami Sastri, J.
1. This appeal arises out of a suit for specific performance filed by the plaintiffs against defendants 1 to 6.
2. The case for the plaintiffs is that defendants 1 to 3 were carrying on business as merchants, that there were dealings between the plaintiffs and defendants 1 to 3, such dealings consisting in the plaintiffs advancing moneys to the defendants and also standing sureties for them in the Bank of Madras, that about the date of the agreement to sell, evidenced by Ex. A, about Rs. 18,000 was due to the bank in respect of the suretyship transaction, that Rs. 8,000 odd was due to the plaintiffs themselves by defendants in respect of moneys given as loans, that the defendants wanted money to pay some other pressing debts and asked for a loan and that Rs. 8,000 odd was advanced in cash and that for this sum of Rs. 35,000, made up of these transactions referred to, the defendants executed a promissory note filed as Ex. B in the case and an agreement to sell ten velis of land evidenced by Ex. A in the case, the agreement being that, if the amount due on the promissory note, Ex. B, was not paid in one month, the lands specified in Ex. A covering about 10 velis should behold for the consideration of Rs. 35,000. Defendants 1 to 3 were adjudicated insolvents and the Official Receivers have been brought on the record. The Official Receivers are defendants 7 and 8 in the case. Defendant 5 and 6 are attaching creditors and defendants 4 is the minor brother of defendant 3. Defendant 1 was ex parte and the plea of defendants 2 and 3 was that, as there was no consideration for the agreement, it was not binding on them. It was pleaded that there was a variation, a material alteration, in the agreement Ex. A, that the original agreement which stipulated six months for payment was altered into one month. It is contended that that alteration vitiates the transaction and makes the contract-unenforceable. It is also pleaded that the transaction was a transaction which was entered into not bona fide but to defraud creditors and that the agreement cannot be specifically enforced because it was in fraud of creditors.
3. The Subordinate Judge finds that there was full consideration for this document. He also finds that there was no alteration and that, although six months was originally mentioned in the document, it was before execution altered into one month, but he is of the opinion that the transaction evidenced by Ex. A cannot be enforced as, in his view, although the full consideration passed, the transaction was entered into with a view to defeat, defraud and delay creditors. It is not clear from his judgment whether he relies on Section 53, T. P. Act, or Section 54, Prov. Ins. Act. The remarks in the concluding portion of his judgment seem to imply that he had these two sections in view. He dismissed the suit for specific performance, but passed a decree for Rs. 35,525, against defendants 1 to 3 personally and the joint family properties of defendant 4. Against this decree the plaintiffs have appealed.
4. The main grounds of appeal are based on the findings of fact that consideration was paid in full and that as the document was not fraudulently altered, there was no question of its being invalid under the provisions of Section 53, T. P. Act, and that as regards Section 54, Prov. Ins. Act, the matter was one which could not be decided by a civil Court, it being entirely within the province of the insolvency Court to set aside the transaction if the case fell within Section 54, Prov. Ins. Act and that in any view there is nothing in this case to support the inference that the transaction was one which was liable to be set aside as a fraudulent preference coming under Section 54, Prov. Ins. Act.
5. We may dispose of the contention as regards the jurisdiction of the Court, under Section 54, Prov. Ins. Act, shortly. If the suit were one to set aside an alienation or to set aside a contract as being a fraudulent prefe