Bai Hiradevi v. Official Assignee Of Bombay

Chagla, C.J:—

This is an appeal against a judgment of Mr. Justice Coyajee and it arises out of a motion taken out by the Official Assignee, who is the assignee of the estate and effects of the husband of the first appellant and father of appellants Nos. 2, 3 and 4, for a declaration that a deed of gift dated May 22, 1950, made between Daulatram Hukumchand and the appellants was void as against the Official Assignee. The learned Judge, after taking evidence, decided in favour of the Official Assignee and held this deed of gift to be void.

Now, a petition was presented by a creditor on August 9, 1951 to adjudicate Daulatram insolvent, and the act of insolvency which was relied upon was a notice of suspension of payment of his debts given by him on August 2, 1951. He was adjudicated insolvent on August 21, 1951. The Official Assignee has challenged the deed of gift under s. 55 of the Presidency-towns Insolvency Act and that section permits him to avoid a voluntary transfer. If a transfer is made in consideration of marriage, or if it is made in good faith and for valuable consideration, such a transfer cannot be challenged by the Official Assignee. But if a transfer is made without consideration, then such a transfer by the insolvent is liable to be challenged provided the transfer is made within two years of his adjudication. In this case, the insolvent was adjudged on August 21, 1951, and the date of transfer is May 22, 1950, and so the Official Assignee, if he could satisfy the Court that the transaction was without consideration, was within his rights in challenging the transaction.

Turning to the deed of gift, it is a short document and it sets out the donees, who are the wife and the three sons of the donor including a minor son; and then the operative part of the document transfers, assigns and conveys to the donees all the lands, hereditaments and premises described in the Schedule in consideration of natural love and affection which the donor bears to his sons, the said donees. Although the donees include the wife, through some curious omission or bad drafting, natural love is indicated only in favour of the sons and not of the wife. But it is clear that this is a disposition of property by the insolvent in favour of his wife and children without consideration. It constitutes a deed of gift and satisfies the conditions of ss. 122 and 123 of the Transfer of Property Act. It is not disputed in this case that the property transferred was accepted by the donees; they were actually in possession and received the income of the property. Section 123 requires that, in the case of a gift, the transfer must be effected by a registered document signed by or on behalf of the donor, and attested by at least two witnesses. All these formalities have been complied with. Now, what was sought to be urged by the appellants before Mr. Justice Coyajee was that, although the document purported to be a deed of gift, in fact it was a conveyance for consideration, and they wanted to prove that there was consideration for transfer of property, the subject-matter of the suit. The learned Judge allowed the evidence and on the evidence held that there was no consideration for the transfer of these properties to the appellants and therefore the Official Assignee was entitled to succeed.

Now, the Official Assignee objected before the learned Judge to any evidence being led by the appellants to prove that the document was a conveyance against the tenor of the document. The learned Judge over-ruled the objection and permitted the evidence to be led. Before we go into the merits of this appeal, we must consider whether the learned Judge was right in overruling the objection of the Official Assignee. In our opinion, with respect, the learned Judge was in error and he should not have allowed evidence to be led to contradict the terms of the document of May 22, 1950. Before we turn to any authorities, perhaps it would be best to look to the language of ss. 91 and 92 of the Evidence Act. Section 91 provides (and it is necessary only to set out the material part) that when the terms of a disposition of property have been reduced to the form of a document, no evidence shall be given in proof of the terms of such disposition of property, except the document itself. Therefore, in order to establish what the terms of the disposition of this property were, it would not be open to a party to whom the property is transferred, or the party transferring the property, to prove the terms of the disposition by any other evidence excepting the document itself. Section 92 prohibits extrinsic or oral evidence to alter the terms of the disposition of property, and it provides that no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms. Now, to this section there are various provisoes and those provisoes lay down when certain facts may be proved to vary or contradict the terms of the agreement. Proviso (1), which is the important proviso, lays down that any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration, or mistake in fact or law. Any of these facts may be proved for the purpose of invalidating the document; and applying our mind to the question of consideration it is always open to a party to a document to contend that either there was a failure or a want of consideration and therefore the document is not binding upon him or the document is invalidated. Proviso (2) deals with the proof of the existence of a separate oral agreement as to any matter on which the document is silent. Proviso (3) deals with a condition precedent to be satisfied before any obligation under the document attaches; proviso (4) deals with any distinct subsequent oral agreement to rescind or modify a contract; proviso (5) is with regard to usage or custom by which incidents not expressly mentioned in any contract may be annexed to a particular contract; and proviso (6) permits a fact to be proved to show in what manner the language of a document is related to existing facts. Now, it is clear that the case of the appellants does not fall within, any of these provisoes. It is not the attempt of the appellants to prove want or failure of consideration; on the contrary, their attempt is to prove the presence of consideration when the document itself states that there was no consideration. Now, it is always open to parties to an agreement or a document containing disposition of property to prove that certain recitals which are statements of fact are not correct. If the parties were to do that, then they are not in any way contradicting or varying or adding to or subtracting from the terms of the contract or disposition. If, for instance, a document were to state in the recital that a certain consideration was paid prior to or at the time of the execution of the document, it would be open to either of the parties to prove that statement was not correct, and the reason for permitting that evidence is that what is being done is to prove that a certain fact is different from what it was mentioned to be in the document itself and not to modify or vary the terms of the agreement. But consideration is undoubtedly a term and a very important term—of a contract or a deed of conveyance or of gift. A conveyance may mention the consideration for the transfer of property. A deed of gift may mention that the term of the transfer of property is that there is no consideration. Now, in our opinion, it is not open to the parties under s. 92 when consideration is mentioned to prove that there was no term as to consideration or that the consideration was different from the one mentioned in the document. In the case of a conveyance, it would not be open to either of the parties to the document to prove that, if the consideration was mentioned as Rs. 10,000, in fact the consideration was less or more. Equally, in a deed of gift it would not be open to a party to prove that, although the term of the deed was that there was to be no consideration, still the term was different from what was mentioned in the document and that there was consideration for the document. It seems to us difficult to understand how it could possibly be contended that, when the appellants tried to establish that the deed of gift was not a deed of gift but a conveyance of property for consideration, they were not contradicting an important term of the deed of gift. One way the matter can be decided is this. If the insolvent had sued his wife or his children for payment of consideration for the transfer of the property to them and he had attempted to prove that, notwithstanding the document, his wife and children had agreed that they would pay him a certain consideration, obviously the Court would not have permitted the insolvent to prove that, because it would have been varying or contradicting the term of the document. The wife and children are now attempting to do the very thing which the husband would have been prevented from doing if he had filed a suit for recovery of consideration. Their answer to the Official Assignee's action is this:—“Although you are entitled to recover the property by reason of the tenor of the document and by reason of the fact that one of the terms of the document is that there shall be no consideration, we want to prove that what was agreed between the parties was different from what is embodied in the document itself, and although the document says that there is no consideration we want to prove that there was consideration.”

Now, apart from authorities, we should have thought that, on the plain terms of ss. 91 and 92, such evidence would not be permissible. But Mr. Laud has strongly relied—and, from his point of view, rightly relied—on a decision of the Privy Council reported in Hanif-un-nissa v. Faiz-un-nisa(4). Frankly, that decision does create some difficulty. In that case, the respondent Faiz-un-nisa had executed a deed which purported to be one of sale of property in favour of her three children, who were the appellants before the Privy Council. The deed of sale recited the consideration as Rs. 60,000 and the vendor, that is, Faiz-un-nisa, admitted in the document that she had received consideration. The respondent then sued her three children (the appellants) and their transferees for a declaration that the deed was of no effect against her, and, in the alternative, she sued for payment of the consideration of Rs. 60,000. Her children (the appellants) admitted that Rs. 60,000 had never been paid, but they pleaded that the plaintiff did not intend to take the purchase-money mentioned in the deed of sale. The Subordinate Judge dismissed the suit. He held that natural love was the real consideration for the deed, that it was not a fictitious deed, and that the respondent was estopped from claiming any relief against the transferees. The respondent appealed to the High Court and the High Court held that the defendants were precluded by s. 92 of the Indian Evidence Act from giving parole evidence for the purpose of showing that the deed of sale was in reality intended by the plaintiff to be a deed of gift, and, therefore, they decreed the plaintiff's suit. The sons appealed to the Privy Council; and in a very short judgment of a few lines, Lord Macnaghten, delivering the judgment on behalf of the Board, says:

“Their Lordships think the decree appealed from cannot be sustained. They are of opinion that the proper course will be to remit the case to the High Court to be dealt with on the evidence, and they will humbly advise His Majesty accordingly.”

Now, what is argued by Mr. Laud and this is the argument that found favour with the learned Judge below is that here the document, according to its tenor, was a deed of sale, the appellants wanted to lead evidence to show that it was a deed of gift, and the Privy Council, differing from the High Court, directed the High Court to permit the defendants (the appellants) to lead that evidence. Mr. Laud says that the case before us is a converse one, but that the principle is the same, and that if the Privy Council could permit the transferees to prove that a deed of sale was in reality a deed of gift, it is open in this case to the transferees to prove that a deed of gift is a deed of sale or a conveyance for consideration. Now, if the Privy Council had really laid down, that then undoubtedly there would be considerable force in Mr. Laud's contention. But, in our opinion, when we scrutinise this judgment, the Privy Council has not laid down that broad and wide proposition which is contended for by Mr. Laud. It must be borne in mind that in this case the appellant had admitted receipt of consideration, and notwithstanding that, in the alternative, she was suing for Rs. 60,000 the consideration mentioned in the deed, and the sons admitted that although the receipt of consideration was mentioned in the document they had never paid the consideration. Now, there can be no doubt that, according to the principle we have just stated, it would be open to the plaintiff to prove as a fact that consideration had not been received. That fact did not form a term of the document. It was in the recital and the true state of facts can always be established. The plaintiff was freed from the responsibility of proving this because her sons themselves admitted that no consideration had been paid, and on that state of the record she would have been entitled to a decree for Rs. 60,000. But the case of the sons was that, although no consideration had been paid, it was agreed that no consideration should be received. Therefore, what the sons were really trying to establish was something outside the document itself. What they wanted to establish was what was the real position with regard to the statement of fact that consideration had been paid. They admitted that statement was false or incorrect; but they wanted to explain why that incorrect statement was mentioned in the document and they wanted to explain that by proving that, inasmuch as the intention of the parties was that no consideration should be received the document stated that the consideration had been paid. Now, it is obvious that if the appellant could prove as it was necessary to prove that fact in that case—that no consideration had been received, it was equally open to the other side to contend why that incorrect statement had been made in the recitals of the document; and it is only from this point of view that this decision can be made consistent with the plain language of ss. 91 and 92. Unfortunately, we are not enlightened by any principle laid down by the Privy Council or by any reason given in the judgment. But the judgment of the Privy Council is binding upon us and, therefore, we must try and explain how this judgment came to be delivered.

Now, we find that two High Courts—the High Court of Madras and the High Court of Allahabad—have both tried to explain the judgment of the Privy Council. Unfortunately and that is the other difficulty—we do not have the judgment of the Allahabad High Court which was reversed by the Privy Council and so we are not in a position to know the facts in detail, nor me reasoning of the High Court which induced them to take the view that the defendants were not entitled to lead evidence. But turning first to the Madras High Court, there is a judgment of that Court which is reported in Mothey Krishnayya v. Md. Galeb. It is a judgment of a single Judge Mr. Justice Wallace, and he takes the view that the net result of the discussion of the Privy Council case is that it is open to a party to prove want of consideration or failure of consideration or a consideration, but it is not open to him to prove a variation in the amount of consideration. The learned Judge also sounds a note of warning when he says (p. 660):

“The scope of that Privy Council judgment has been considered by this Court in several later cases, as the judgment therein is so short that it may be imperfectly understood and even misused.”

The Allahabad High Court considered this judgment of the Privy Council in a Full Bench decision reported in Muhammad Taqi Khan v. Jang Singh(5). The learned Chief Justice, at page 11, says:—

“…I am clearly of the opinion that the case of Hanif-un-nissa did not decide the wider question that it is open to the defendant to show that the consideration mentioned in the sale deed was fictitious even though there was under the deed an existing liability on the defendant to pay such an amount.”

The distinction which the learned Chief Justice draws is that, where on the face of the document itself it is clear that there is no further liability upon the transferee, then it is open to the transferee to establish that there is no such liability, not because the consideration has been paid, but because of any other reason. Therefore, the learned Chief Justice limits the decision of the Privy Council to the single case where clearly the transferee is under no liability under the document; and when the transferor sues the transferee to recover the consideration in respect of which the document itself shows that there is no liability, then it is open to the transferee to establish that absence of liability even by proving that it was intended between the parties that no consideration should be paid. What the Full Bench of the Allahabad High Court actually held in that case was that where a part of the sale consideration is on the face of the document still outstanding and to be paid by the vendee, it is not open to him to produce evidence to show that there was a separate contemporaneous oral agreement that this sum would not be payable and was merely fictitious. In our opinion, in this case the appellants have not attempted to establish that any fact mentioned in the document is erroneous. What they are seeking to establish is that the term of the document which provided that there should be no consideration for the transfer was not the real term, but that the term was something different, namely, that there was to be consideration for the transfer.

Mr. Laud has relied on s. 25 of the Contract Act. In our opinion, that section has no application whatsoever to the facts of this case. That section is an exception to the general principle of the law of contract, that an agreement without consideration is void. Three cases are set out in that section which would make an agreement a contract although there is no consideration; and what is relied upon is the first case mentioned in that section and that is to the following effect:—

“An agreement made without consideration is void, unless it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other.”

The section provides that in such cases such an agreement is a contract and what is argued is that we have here a writing which is registered between the parties on account of natural love and affection, and although there is no consideration for the agreement, still by reason of this sub-section the agreement is not void, but is looked upon in the eye of the law as a contract. The very short and simple answer to this contention is that we are not dealing with a contract in this case. A disposition of property brought about by transfer is not a contract. The relevant section which deals with this transaction is not s. 25 of the Contract Act, but s. 122 of the Transfer of Property Act which permits a transfer of property without consideration provided the requirements of s. 123 are complied with; and what the Official Assignee is challenging is not a contract which may be valid under s. 25, but a transfer which, being without consideration, is voidable as against him. In our opinion, therefore, the learned Judge was in error in admitting evidence to contradict a clear provision or term of the writing which provided for disposition of property and which amounted in law to a gift as defined by s. 122. In the view that we take, it is unnecessary to consider whether, on the evidence that was led before him, he was justified in coming to the conclusion that in fact there was no consideration for the transfer challenged by the Official Assignee.

The result is, the appeal fails and must be dismissed with costs.

Liberty to the respondent's attorneys to withdraw the sum of Rs. 500 deposited by the appellants' attorneys and to apply it in part satisfaction of the order of costs herein.

Attorneys for appellants: Haridas & Co.

Attorneys for respondents: Kanga & Co.

Appeal dismissed.

P.M.P