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Case Number

A.S No. 227/85, EFA 5/85 and CMA 210 of 1986

Advocates

For the Appellant: Siby Mathew, PA. Rezya, Wilson Urmese & Thomas John
For the Respondent: 1st S. Narayanan Poti, S. Ramesh Babu & Elizabeth Mathai Idicula
For the Respondent: other

Judges

T.L Viswanatha Iyer
P. Krishnamoorthy, JJ.

Acts

Article 113 of the Limitation Act, 1963 (corresponding to Article 120 of the 1908 Act)
SECTION 53 TRANSFER OF PROPERTY ACT 1882
clause (c) of sub-rule (2) of rule 66
Order 21 Rule 90 of the C.P.C15.
sub-rules (1) and (2) of rule 90
sub-rule (2) of rule 90.20.
sub-rule (21) of rule 90.
Order 21 Rule 66(2).
Section 53 T.P Act,
Order 21 rule 90.
Order 21 Rule 89
S. 53, T.P Act,

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Smart Summary

Judgment Summary — Viswanatha Iyer, J.

Factual and Procedural Background

This set of proceedings arises from O.S. No. 191 of 1981 (Sub-ordinate Judge, Thrissur) and related execution and interlocutory applications. The plaintiffs (four persons and their predecessor Devassy) had earlier obtained decrees in several suits (including O.S. No. 74 of 1972 and others) against St. Joseph's Trading Company and partners. The first defendant (Manual alias Mary / Mannal) owned immovable property of 1.09 acres which, while an attachment was in force in favour of Devassy (attachment dated 25-5-1972), was sold on 5-10-1973 by the first defendant to her three sons (defendants 2 to 4) by a deed of sale (Ext. B2), for a stated consideration of Rs. 12,000 (Rs. 750 paid in cash, balance reserved).

Plaintiffs later filed O.S. No. 191 of 1981 (10-4-1981) under Section 53 of the Transfer of Property Act, 1882, seeking declaration that Ext. B2 was executed with intent to defeat and delay creditors and for consequential reliefs. Defendants 2 and 4 succeeded initially in obtaining an order under Order 21 Rule 89 C.P.C. to set aside a court sale by depositing the decree amount; other execution and claim petitions followed (E.A. Nos. 36 of 1981, 85 of 1981, etc.). The trial court decreed O.S. No. 191 of 1981 on 14-1-1985, holding the sale void under Section 53 T.P. Act and that the suit was within limitation (filed within three years of knowledge). Consequent orders dismissed claim petitions of defendants 2 and 4.

The decree-holder South Indian Bank executed its decree; the property was sold on 15-2-1986 and purchased by Rosily (wife of the second defendant) for Rs. 1,05,100. The plaintiffs, claiming they had no notice of execution and that the sale was vitiated by fraud and irregularity (low price and non-mention of plaintiffs' attachment), applied under Order 21 Rule 90 C.P.C. The lower court set aside the sale (order dated 25-9-1986) and permitted plaintiffs to pay the decree amount within one month. Rosily appealed by C.M.A. No. 210 of 1986. Defendants 2 and 4 appealed the decree in A.S. No. 227 of 1985; they also filed E.F.A. No. 5 of 1985 against dismissal of their claim petition.

Legal Issues Presented

Whether the deed of sale Ext. B2 dated 5-10-1973 is void under Section 53 of the Transfer of Property Act, 1882 as a transfer made with intent to defeat or delay creditors.
Whether a suit under Section 53 T.P. Act is barred by limitation when filed more than three years after the date of sale but within three years of the plaintiff's knowledge of the alleged fraudulent transfer (i.e., when does limitation commence for such suits).
Whether a court sale (execution sale) can be set aside under Order 21 Rule 90 C.P.C. on account of (a) non-mention in the proclamation of sale of an earlier attachment obtained by plaintiffs, and (b) alleged inadequacy of the sale price.
Whether non-mention of an attachment in the sale proclamation is a material irregularity under Order 21 Rule 66(2) and Rule 90, and whether such omission causes "substantial injury" under Rule 90(2) so as to vitiate the sale.
Whether the purchasers (defendants 2 to 4) were bona fide transferees who could defeat the plaintiffs' claims.

Arguments of the Parties

Plaintiffs' Arguments

The deed Ext. B2 was executed by the first defendant to defeat and delay creditors; the plaintiffs sought avoidance under Section 53 T.P. Act.
They had obtained an order of attachment in O.S. No. 191 of 1981 prior to the execution sale and therefore the execution sale was vitiated by fraud and irregularity; the sale proclamation failed to mention the attachment.
The court sale of 15-2-1986 fetched a grossly inadequate price (plaintiffs asserted market value about Rs. 3 lakhs; sale fetched Rs. 1,05,100) and was therefore the product of fraud/collusion and should be set aside under Order 21 Rule 90 C.P.C.
The suit under Section 53 was timely because plaintiffs only learned of the sale in early January 1981 and filed suit on 10-4-1981.

First Defendant and Defendants 2–4 (Transferor and Transferees)

The first defendant maintained the sale was bona fide and made to satisfy a decree (specifically to satisfy the decree in O.S. No. 74 of 1972); the sale was thus not made with intent to defeat creditors.
The first defendant contended the suit was barred by limitation, arguing the three-year period runs from the date of sale (5-10-1973) and not from the date of the plaintiffs' knowledge of the alleged fraud.
Defendants 2–4 claimed rights under Ext. B2 and sought to set aside the court sale to the decree-holder by depositing the decree amount under Order 21 Rule 89 C.P.C.

South Indian Bank (Decree-Holder) and Auction Purchaser (Rosily)

The South Indian Bank supported the plaintiffs in setting aside transfers void as against creditors and took execution steps; its execution sale proceeded and produced the auction purchaser Rosily.
Rosily (auction purchaser) challenged the lower court's order setting aside the sale, arguing the omission of mention of plaintiffs' attachment was not a particular required by Order 21 Rule 66(2) and that non-mention caused no substantial injury; thus the sale should be confirmed. Counsel for Rosily relied on authority that an attachment is not an encumbrance and does not need mentioning in proclamation of sale.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Durga Prasad Shraff v. Mahadeb Lal Singhania, AIR 1937 Patna 50	Held that an attachment does not create title and is not an encumbrance/charge required to be specified in the proclamation of sale under Order 21 Rule 66(2).	The court relied on this authority to support the view that non-mention of an attachment in the sale proclamation is not a material irregularity vitiating the sale.
Ayya v. Parasmal, 1982 (1) K.L.J. 130	Affirmed the view that non-mention of an attachment is not a material irregularity for sale proclamation requirements.	Used as supporting authority for the proposition that attachment need not be specified and its omission does not vitiate the sale.
Thiruvenkita Reddiar v. Noordeen, 1977 K.L.T. 877	Illustrates that attachment does not prevent an involuntary (execution) sale; attachment only interdicts private transfer or delivery.	Referenced to show attachment has no bearing on validity of execution sale; supported conclusion that non-mention was not material.
Rukhmani v. Ramsaroop, AIR 1944 Nag. 324	Attachment does not prevent involuntary sale (supporting principle).	Cited among authorities to demonstrate that attachment is not relevant to a court sale's validity.
Subbarao v. Official Receiver, AIR 1965 A.P. 52	Attachment's irrelevance to involuntary sale; it does not create an encumbrance affecting sale validity.	Relied upon to confirm that non-mention of an attachment does not constitute a material irregularity under Order 21 Rule 66(2).
State Bank of Travancore v. Ninan, AIR 1967 Ker. 171	Establishes that suits under Section 53 T.P. Act are governed by Article 113 of the Limitation Act (i.e., Article 120 of 1908 Act equivalent).	Used to show the correct limitation provision for Section 53 suits; part of the line of authorities on accrual of cause of action.
Tharu Cheru v. Mary, 1973 K.L.T. 31	Also supports that Article 113 governs limitation for Section 53 suits.	Cited along with State Bank of Travancore to establish the limitation rule applicable to the plaintiffs' suit.
Abdallakhan v. Purustottam, AIR 1948 Bombay 265	Held that limitation for suits under Article 120 begins when the plaintiff has knowledge of the fraudulent transfer; the right to sue accrues on knowledge of fraud.	The court relied on this decision (and the reasoning of Gajendragadkar, J.) to hold that limitation runs from knowledge of fraudulent transfer, not the date of transfer; thereby the plaintiffs' suit was timely.
Mr. Bolo v. Mt. Koklan, AIR 1930 P.C. 270	Authority referenced in the line of cases establishing accrual of cause of action for fraud-based transfers.	Relied upon in the chain of precedent affirming that limitation commences on knowledge of fraud.
Annamalal Chettiar v. Muthukaruppan, AIR 1931 P.C. 9	Authority cited in the accrual/limitation-related jurisprudence.	Used in the historical chain of decisions supporting commencement of limitation from knowledge of fraud.
R.M. O.M.Sp v. Nagappa Chettiar, AIR 1941 P.C. 1	Part of the jurisprudential authorities cited on limitation/acc rual of cause of action.	Cited as one of the authorities relied upon in Abdallakhan and in the panel's limitation analysis.
Ahmed Ali v. Neeralla, AIR 1959 A.P. 280	Holds that the cause of action for such suits arises when the creditor knows he has been defrauded, not on the date of alienation.	Cited to support the view that plaintiffs' suit filed after they became aware of the sale was within the limitation period.
Marteandu Rao v. Chenna Bassppa, AIR 1951 Mad. 388	Also supports the principle that limitation runs from knowledge of fraud.	Used as additional authority confirming the limitation principle applied by the court.
Rajeswari & Co. v. Union of India, AIR 1973 Mad. 222; affirmed in Union of India v. Rajeswari & Co., (1986) 3 SCC 426 (AIR 1986 S.C. 1748)	Dealt with transfers made in anticipation of claims where proceeds were used to discharge debts; recognized circumstances where transfers could be salvaged if debtor preferred some creditors over others without insolvency/bankruptcy.	The court considered this line but distinguished it on facts, holding Rajeswari inapplicable because here the transfer was to pay one of many creditors at a remote future date and other circumstantial factors indicated intent to defeat creditors.

Court's Reasoning and Analysis

The court proceeded in two main phases: (A) deciding the challenge to the lower court's order setting aside the execution sale (C.M.A. No. 210 of 1986); and (B) addressing the merits of the underlying appeals (including limitation and the question whether Ext. B2 is void under Section 53).

(A) On confirmation or setting aside of the execution sale (C.M.A. No. 210 of 1986)

The lower court set aside the auction sale held on 15-2-1986 for two reasons: (i) non-mention of the plaintiffs' attachment (O.S. No. 191 of 1981) in the sale proclamation, and (ii) alleged inadequacy of the sale price (plaintiffs claimed market value ~Rs. 3 lakhs; sale realized Rs. 1,05,100).
On the price issue, the Bench noted that apart from the plaintiffs' assertion of market value, there was no evidence (valuation commission, expert evidence) to show the property was worth Rs. 3 lakhs at the time of sale. Mere inadequacy of price alone is not a ground to set aside a court sale unless it is caused by fraud or irregularity in publishing or conducting the sale (Order 21 Rule 90). The court was not satisfied that inadequacy alone supported the lower court's conclusion.
On non-mention of attachment: the court reviewed Order 21 Rule 66(2) and authorities and concluded an attachment is not an encumbrance or charge that must be specified in the sale proclamation. An attachment only interdicts private transfer/delivery and does not create title nor prevent an involuntary (execution) sale. Consequently, omission of mention of the attachment is not a material irregularity vitiating the sale.
The court emphasised that even if some irregularity is shown, Order 21 Rule 90(2) requires the applicant to demonstrate substantial injury caused by such irregularity. The plaintiffs failed to establish that the non-mention of the attachment caused them substantial injury affecting validity, value, or price fetched in the execution sale. Since there was no irregularity in publishing/conducting the sale (in the sense that would invalidate it) and no substantial injury, the lower court erred in setting aside the sale.
Accordingly, the appellate court allowed C.M.A. No. 210 of 1986 and set aside the lower court's order that had annulled the execution sale, thereby confirming the sale to Rosily.

(B) On limitation and the merits of O.S. No. 191 of 1981 (A.S. No. 227 of 1985)

The court held that suits under Section 53 T.P. Act are governed by Article 113 of the Limitation Act (corresponding to Article 120 of the 1908 Act). The key question is when the right to sue accrues for a suit challenging transfers on the ground of fraud.
Relying on a consistent line of authority (including Abdallakhan v. Purustottam and subsequent cases), the court concluded that limitation commences when the plaintiff has knowledge of the fraudulent transfer — i.e., when the right asserted is infringed or unequivocally threatened and, for fraud-based claims, knowledge of the fraud is necessary before the period runs.
Applying that principle, the plaintiffs' suit filed on 10-4-1981 (they claimed to have learned of the sale in early January 1981) was held to be within time.
On whether Ext. B2 was void under Section 53: the court examined the surrounding circumstances. It noted the close familial relationship (transfer from mother to three sons who lived with her), the timing of the transfer while suits were pending against the transferor (the first defendant being a partner in the firm sued), the paltry immediate payment (Rs. 750) with the balance deferred and reserved in a manner that did not carry interest, absence of contemporaneous explanation why sale was necessary, lack of enquiries by transferees into liabilities, and delay of actual payments to the decree-holder until years later. The first defendant was not examined and offered no satisfactory explanation.
Given these cumulative circumstances, the court concluded the sale was intended to screen the property from creditors and to defeat and delay them; defendants 2–4 were not bona fide transferees. The lower court's decree avoiding Ext. B2 under Section 53 was therefore upheld on the merits.
However, because the execution sale to Rosily was confirmed on appeal, plaintiffs effectively could not benefit from the successful avoidance of Ext. B2 as the property had passed to an auction purchaser.

Holding and Implications

Holding:

The court made the following dispositive orders (each emphasized below):

C.M.A. No. 210 of 1986 is ALLOWED. The appellate court set aside the lower court's order of 25-9-1986 that had set aside the execution sale of 15-2-1986; the sale to Rosily is therefore confirmed.
E.A. No. 154 of 1986 (Sub-Court, Thrissur) is DISMISSED.
A.S. No. 227 of 1985 and E.F.A. No. 5 of 1985 are DISMISSED with costs.
On the merits, the court agreed with the lower court that Ext. B2 was voidable under Section 53 T.P. Act (intended to defeat and delay creditors) and that the suit challenging it was within limitation (commencement of limitation runs from plaintiffs' knowledge of the fraud).

Implications:

Direct effect on the parties: Although the plaintiffs succeeded in obtaining a decree that Ext. B2 was intended to defeat creditors and therefore voidable under Section 53, the confirmed execution sale to Rosily (auction purchaser) means the plaintiffs cannot realise the property — their practical remedy has been frustrated by the subsequent court sale which has been upheld. Defendants 2 and 4 (the original transferees) and the first defendant have had their appeals dismissed, but because the property has passed to an auction purchaser, those decrees are largely infructuous as regards possession of the subject property.
The court reaffirmed established principles rather than laying down any novel rule: (a) limitation for Section 53 suits runs from knowledge of fraud; (b) an attachment is not an encumbrance that must be specified in a sale proclamation under Order 21 Rule 66(2); and (c) a sale will not be set aside for inadequate price unless inadequacy is linked to fraud or irregularity causing substantial injury under Order 21 Rule 90. The opinion did not purport to set out any new precedent beyond applying these settled principles to the facts.

Costs: The parties will bear their respective costs as indicated by the court.

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Iyyunni And Others v. Anto And Others

The Judgment of the Court was delivered by

Viswanatha Iyer, J.:— A.S No. 227 of 1985 arises out of the judgment ma the decree in O.S No. 191 of 1931 on the file of the Sub-ordinate Judge of Thrissur. We shall state the facts therein as the of her two appeals actually follow in the wake of this decision. We shall refer to the parties in the further discussion, as they are arrayed in the trial court in the suit. O.S No. 191 of 1981, for the purpose of convenience.

2. A.B 227 of 1985: Defendant 2 and 4 are the appellants. They are the children of one Mannal alias Marry, the first defendant. The four plaintiffs, namely respondents 1 to 4 are the contesting parties to this appeal. The other respondents in the appeal are Manual alias Mary, her another son, who was the third defendant and the South Indian Bank Limited, Thrissur who was the fifth defendant in the suit. The suit was one under section 53 of the Transfer of Property Act, 1882 for a declaration that the dead of sale Ext. A9 (original of which is Ext. B9) dated 5-10-1973 executed by the first defendant in favour of her three sons, defendants 2 to 4 was one executed wish intent to defeat and delay the creditors of the first defendant, and for other consequential reliefs. The four plaintiffs and their predecessor one Devassy had filed different suits O.S Nos. 74 and 87 of 1972, 64, 114 & 194 of 1973 against one St. Joseph's Trading Company and its partners, including the first defendant herein for recovery of amounts due to them. The first defendant was the sixth defendant in all those suits. The first suit ??? Devassy, namely O.S No. 74 of 1972 was filed on 23-5-1972 in which he attached the suit properties herein which belonged to the first defendant on 25-5-1972. It was while the attachment was in force that the property which had an extent of 1.09 acres was sold by the first defendant to defendants 2 to 4 by Ext. B2 dated 5-10-1973 for a consideration of Rs. 12000/- of which Rs. 750/- was paid paid in cash, and the balance was reserved with the vendees for payment to the decree holder in O.S No. 74 of 1972, and in case the amount was not payable to the first defendant herself. The other four salts by the plaintiffs herein followed, but without any order of attachment. All these suits ware tried jointly and decreed on January 3, 1978.

3. Two other suits O.S Nos. 3 and 4 of 1973 had been filed by the 5th defendant South Indian Bank Limited against the same firm and its partners for recovery of amounts due to them. Those suits were also decreed.

4. The decree in O.S No. 74 of 1972 was put in execution. The suit property was sold and purchased by Devassy, the decree bolder himself for Rs. 30000/- on 17-12-1980. Before the sale was confirmed, defendants 2 and 4 filed E.A No. 36 of 1981 under Order 21 Rule 89 of the C.P.C to set aside the sale after depositing the decree amount duo to Devassy under the decree, and poundage. These defendants claimed right to the property under the deed of sals Ext. B2. The petition was allowed by the order Ext. A8 dated 18-2-1981 and the sale set aside.

5. The plaintiffs who were the decree holders in the other four suits namely O.S Nos. 87 of 1972 and others could not however proceed against the property for realisation of their due in view of the sale to defendants 2 to 4 by Ext. B2 on 5-10-1973. According to them, they came to know about the sale when they took out execution of the respective decrees and the sals in question was put forward a defence early in January 1981. Thereupon they filed the present suit O.S No. 191 of 1981 on April 10, 1981 alleging that the sals was a fraudulent one intended to defeat and delay the creditors of the first defendant who was also liable under the various decrees as a partner of the St. Joseph's Trading Company.

6. The first defendant in a written statement of her own contested the suit with the plea Chat the sale was for adequate consideration for the purpose of satisfying the decree, if any, that may be passed in O.S No. 74 of 1972. The sale, according to her, was a bona fide one, intended to satisfy the decree in O.S No. 74 of 1972. She also contended that the suit was barred by limitation as it had been filed more than three years after the date of she sale, namely 5-10-1973.

7. Defendants 2 to 4 in their separate written statements contended likewise and sought dismissal of the suit.

8. The fifth defendant South Indian Bank supported the plaintiffs. They had token steps to execute a decree in O.S No. 3 of 1973 when defendants 2 to 4 herein filed a claim E.A No. 85 of 1981 putting forth the sale Ext. B2 in their favour and contending that the suit property was not liable to be proceeded against for realisation of the amounts due from St. Joseph's Trading Company or the first defendant.

9. After trial, the suit O.S No. 191 of 1981 was decreed on January 14, 1985. The lower court held that the transaction in question by which the only property owned and possessed by the first defendant was sold, was in fraud of creditors, and therefore void under section 53 of the Transfer of Property Act, 1882. The lower court also held that the suit was not barred by limitation in as much as it had been filed within a period of three years from the date on which the plaintiffs had knowledge of the sale. The suit was accordingly decreed as prayed for with costs. Defendants 2 and 4 have filed the appeal A.S No. 227 of 1985 impleading the plaintiffs and the other defendants in the suit as respondents.

10. Consequent on this judgment find decree, the claim petition E.A No. 85 of 1981 filed by defendants 2 to 4 was dismissed with costs. Defendants 2 and 4 have filed the appeal EFA No. 5 of 1985 impleading the decree bolder South Indian Bank Ltd., transferor Manual alias Mary and the third defendant as respondents thereto.

11. On the filling of O.S No. 191 of 1981, the plaintiffs had Bought for and obtained an order of attachment of the suit property. After the suit was decreed and the claim petition of defendants 2 to 4 was dismissed, the South Indian Bank proceeded with the execution of the decree and the property was sold on 15-2-1986 and purchased by one Rosily, the wife of the second defendant for a price, of Rs. 1051 lakhs. The plaintiffs who had no notice of the execution proceedings filed the application E.A No. 156 of 1986 to set aside the sale under Order 21 Rule 90 of the C.P.C on the ground that if was vitiated by fraud and irregularity. According to them the property was worth about Rs. Three lakhs, that it had been sold only for 1,05,100/- and that such a low price was fetched only because of the fraud and collusion between the paries. Inter alia, they pointed out that the sale proclamation did not mention about the attachment which they had obtained in O.S No. 191 of 1981, and therefore the sale had proceeded as if there was no encumbrance on the property. This, they stated, was a material irregularity id the conduct of the sale, which vitiated it.

12. The lower court accepted this contention and set aside the sale. Since the plaintiffs had expressed their willingness to pay the amount of the decree due to the South Indian Bank, the lower court permitted them to do so within one month. This order dated 25th September, 1986 setting aside the sale is challenged by Rosily the auction purchaser by filing C.M.A No. 210 of 1986. It is in these circumstances that the three appeals are before us.

13. We may deal with C.M.A No. 210 of 1986 in the first instance in as much as any decision/therein adverse to the plaintiffs will have the effect of readying O.S No. 191 of 1981 and the appeal therefrom A.S No. 227 of 1985 virtually infructuous. As mentioned earlier, we shall be referring to the parties with reference to their array in the suit O.S No. 191 of 1981, as done by us in the earlier past of this judgment, referring to the appellant as the Civil Miscellaneous Appeal as the auction purchaser.

14. The lower court has allowed the application for setting aside the sale for two reasons, firstly on the ground that the non-mention of the attachment O.S No. 191 of 1981 in the Sale proclamation vitiated if as a material irregularity, and secondly on the ground that the property worth about Rs. Three lakhs has been sold for a low amours of Rs. 1,05,100/-. So for as the tetter aspect is concerned, it has to be mentioned that apart from the assertion that the value of the property will be about Rs. Three lakhs, there is no evident on record to show that its price would have been that much at the time of the sale. No commission was issued, and no evidence was tendered about the value of the properly. We have only the ipsi dixit of the plaintiffs that the value of the property would be Rs. Three lakhs and that the price of Rs. 1,05,100/- fetched of the sale was grossly low. Apart from this circumstance, it must also be mentioned that mere inadequacy of the price is not a ground for setting aside a court sale, unless if had been caused by the fraud or irregularity in the publishing and conduct of the sale. We are not therefore quits impressed with the second ground stated by the lower court, of inadequacy of the price fetched at the sale, particularly in the absence of any finding that the alleged low price was related to any feud or irregularity of the nature mentioned in Order 21 Rule 90 of the C.P.C

15. We shall now consider the other ground relied on by the lower court, namely that the non - mention of the attachment in O.S No. 191 of 1981 in the proclamation of sale is a material irregularity vitiating the sale. There is no dispute that the attachment was not mentioned in the proclamation of sale. But then, Smt. Elizabeth Mathai Idiculla, counsel for the appellant auction purchaser submits that it was not one of those particulars required by Order 21 Rule 66(2) to be mentioned in the proclamation of sals, and that, in any event, the non - mention thereof has not caused any substantial injury to the plaintiffs justifying the sale being set aside under Order 21 Rule 90 of the C.P.C In particular, she points out that while clause (c) of sub-rule (2) of rule 66 requires any encumbrance to which the property is liable to be specified, the rule does not insist on particulars of attachments to be mentioned. She submits that even clause (c) of the sub-rule does not import such a requirement, the existence or otherwise of an attachment, having no effect on the nature or value of the property. She refers to the decisions in Ayya v. Parasmal, 1982 (1) Karnataka Law Journal 130, Durga Prasad Shraff v. Mahadeb Lal Singhania, AIR 1937 Patna 50 and Thiruvenkita Reddiar v. Noordeen, 1977 K.L.T 877 in support of bee submissions.

16. In Durga Prasad Shraff v. Mahadeb Lal Singhania, AIR 1937 Patna 50 a Division Bench of the Patna High Court noted that an attachment does not create any title; and that it in not an encumbrance or a charge on the property liable to be specified in the proclamation of sale udder Order 21 Rule 66(2). Its non-mention in the proclamation is not therefore a material irregularity vitiating the sale. The same view was taken in Ayyas' case, 1982 (1) Karnataka Law Journal 130.

17. We are in agreement with the aforesaid view. An attachment only interdicts any private transfer or delivery of the properly or of any interest thereon. It does not create any encumbrance on the property. Since an attachment only prohibits private transfer or delivery of the property, it does not prevent an involuntary sale. (Thiruveukita Reddiar v. Noordeen, 1977 K.L.T 877, Rukhmani v. Ramsaroop, AIR 1944 Nag. 324, Subbarao v. Official Receiver, AIR 1965 A.P 52). The attachment has therefore no relevance so far as a conn sale is concerned and is not a material particular required to be mentioned in the proclamation of sale. We are therefore of the opinion that the non-mention of the attachment effected in O.S No. 191 of 1981 in the proclamation of sale was not a material irregularity vitiating the court sale.

18. Even otherwise, a sale can be set aside only if the material irregularity or fraud has caused substantial injury to the applicant, this being a requirement prescribed by sub-rule (21) of rule 90. This requirement is not satisfied in this case. The requirements of sub-rules (1) and (2) of rule 90 are cumulative and all of ahem have to be satisfied before a sale can be set aside under this provision. If was therefore necessary for the applicants - plaintiffs to establish that they had sustained substantis injury by reason of the non-mention of the attachment in the proclamation of sale.

19. The existence of the attachment in O.S No. 191 of 1981 did not prevent the sale of the properly in execution of the decree in O.S No. 3 of 1973. The property could be sold in execution is respective of the attachment in as much as a sale in execution is not interdicted by an attachment. The existence of the attachment in O.S No. 191 of 1981 was not therefore a material detail which could affect either the validity of the sale, the value of the properly or the price fetched at the sale. The non-mention of the attachment in the proclamation of sale could not therefore cause any injury to the applicants, much less any substantial injury as to bring the case within the purview of sub-rule (2) of rule 90.

20. We have already mentioned that the lower court proceeded on the basis, without anything more, that the non-mention of the attachment is an irregularity. We have held otherwise. If there is no irregularity in the publishing or conduct of the sale and in any case, there was no substantial injury caused to the applicants by reason of the alleged irregularity, the sale cannot be set aside under Order 21 Rule 90. The lower court has wrongly set aside the sale held on 15-2-1986. The order of the lower court is liable to be set aside and the sale has to be confirmed, in the absence of any other reason against its confirmation. We accordingly allow C.M.A No. 210 of 1986.

21. In the light of the above decision, the question of deciding the other two appeals on the merits does not really arise. Both of them have really become infructuous in as mush as the property has passed on to the auction purchaser and nothing remains wish defendants 2 to 4 or the first defendant, to be proceeded against. We shall however deal with these appeals briefly on the merits, A.S No. 227 of 1985 in the first instance, as the order impugned is E.F.A No. 5 of 1985 is only an order passed consequent on the decision in O.S No. 191 of 1981.

22. We shall dual with the question of limitation in the first instance. The gale was on 5-10-1973. The suit was filed on April 10, 1981, more than three years from the date of the sale. Defendants 1 to 4 contend that the suit is barred by limitation according to them the three years period for filing the suit runs from the date of the sale, and not from she date of knowledge thereof, as contended by the plaintiffs and ac accepted by the lower court. According to the plaintiffs, they came to know of the sale early in January, 1981, when it was pus forward for the first time by defendants 2 to 4. The suit was filed soon thereafter. The position is well established that a suit under Section 53 T.P Act, is governed by Article 113 of the Limitation Act, 1963 (corresponding to Article 120 of the 1908 Act) - vide State Bank of Travancore v. Ninan, AIR 1967 Ker. 171 and Tharu Cheru v. Mary, 1973 K.L.T 31. The question is when the right to sue accrues sad time begins to run. The matter was considered elaberately by a Division Bench of the Bombay High Court in Abdallakhan v. Purustottam, AIR 1948 Bombay 265. Gajandragadkar, J. speaking for the Bench relied heavily on the decisions in Mr. Bolo v. Mt. Koklan, AIR 1930 P.C 270, Annamalal Chettiar v. Muthukaruppan, AIR 1931 P.C 9 and Firm O, Rm. O.M.Sp v. Nagappa Chettiar, AIR 1941 P.C 1 and held that limitation for a suit under section 53 of the Transfer of Property Act commences when the plaintiff had knowledge of the fraudulent transfer and not from the date on which the Plaintiff, decides to exercise option of avoiding it. He observed:

“It must now be taken to be settled that in regard to suits falling under Art. 120 the right to sue cannot accrue until the right asserted is infringed or unequivocally threatened, and in cases where the right is based upon an allegation of fraud, limitation cannot commence unless the party asserted the right had knowledge of the said fraud. It is obvious that under S. 53, T.P Act, creditors can impeach only such transfers as are intended by the debtor to defeat or delay his creditors. The right to sue accrues not only because the creditor is defeated or delayed, bus because be is defeated or delayed owing to a fraudulent transfer.”

23. In Ahmed Ali v. Neeralla, AIR 1959 A.P 280, the High Court of Andhra Pradesh held clearly that the reuse of action for such a suit does not arise on the date of the allocation, but on the date when the creditor who seeks to set aside the alienation knows that he has been defrauded, defeated or delayed (See also Marteandu Rao v. Chenna Bassppa, AIR 1951 Mad. 388). Having regard to this consistent line of decisions with which we are in respectful agreement, it has to be held that the suit filed on April 10, 1981 was in time.

24. The further question whether the gale Ext. B2 is hit by section 53 of the Transfer of Property Act has been discussed in detail by the lower court and if has been held that it was one intended to defeat and delay the creditors of the firm defendant. We are in agreement with this conclusion, the reasons for which we shall state. The transfer was by the first defendant mother to her three sons defendants 2 to 4, who, it is in evidence, were all staying with her. This was at a time when the suits had been filed against the first defendant by Devassy and others and the fifth defendant, for recovery of the amounts due to them from the St. Joseph's Trading Company. The first defendant cannot pretend ignorance of the existence of the dues of the said firm, of which she wan a partner, and in respect of which the suits had already been filed No explanation is forthcoming as to why the sale had to be effected at this juncture in favour of the sons, who were all staying with the first defendant. Even if it was a question of making arrangements for payment to Devassy the plaintiff in O.S No. 74 of 1972, it is not disclosed why a sale was necessary and that too, of all the properties owned and possessed by the first defendant, having regard to the close relationship between the parties and their living together. It is also noteworthy that though the consideration was stated to be Rs. 12,000/- only Rs. 750/- was paid, and the balance was reserved with the sons defendants 2 to 4, to be paid to the decree holder and if if was not payable, to be paid to the first defendant herself at that stage. But if is again significant that the balance amount of Rs. 11250/- did not carry any interest, if it was payable to the first defendant. The sale was not disclosed when the execution proceedings for sale of this property were taken by the decree holder Devassy in O.S No. 74 of 1972. The property was sold in court auction and it was only thereafter that defendants 2 to 4 came forward with their application E.A No. 36 of 1981 on the basis of Ext. B2, depositing the decree amount and poundage. In other words, even the amount dm to Devassy was paid only long afterwards, after over seven years from the sale and even after about three years from the date of decree, namely 3-1-1978. There is no case for the defendants, despite their pretence of ignorance of the dues of the St. Joseph's Trading Company - which we find it difficult to accept - that any enquiry was made by any of these defendants about the liabilities of that firm. In fact, the second defendant as D.W 2 admitted that no such enquiries had been made. This really strikes at the root of the bona fides of both the transferor and the transferee. The first fax payment after the transfer so far as it is in evidence, is only on 10-8-1977, about four years later. The value of the property at the time of Ext. B2 is not in evidence, but it is a fact that all the immovable assets of the first defendant stood transferred by that sale.

25. The cumulative effect of these circumstances, particularly the close relationship between the parties and the sale having been effected admittedly for payment of a debt (which according to the defendants may or may nos arise) in the future, is to lead to the inference that the sale was one intended to screen the property from the creditors who had already filed their suits, and to defeat and delay them. The non-examination of the first defendant and the absence of say explanation for the necessity for a sale to the children to discharge a debt on a long future date are also pointers in this direction. We have these fore no hesitation in holding that the sale Ext. B2 was one intended to defeat and delay the creditors of the first defendant.

26. The principle of the decision in Rajeswari & Co. v. Union of India, AIR 1973 Mad. 222 which was affirmed in Union of India v. Rajeswari & Co., (1986) 3 SCC 426 : AIR 1986 S.C 1748 relied on by the defendants does not apply to the fuels of this case. In that case, the transfers were in anticipation of soma possible claims that may be made by the Union of India on the reopening of an assessment to income-tax for which proceedings had already been initiated, with the debtor discharging all his dues with the proceeds of the transfers. It was in evidence that one of the main objects of the gales was to pay off those debts. In those circumstances, the Madaras High Court salvaged the transfers on the ground that was a case where the debtor had only preferred his other creditors to the Union, which he was entitled to do, where so consideration of bankruptcy or insolvency arose. That is not the case here where the sale was at beet to pay off one of the many creditors and that too in the distant future. We are therefore at one with the lower court in holding that the transaction Ext. B2 was one intended to defeat and delay the creditors of the first defendant, that defendants 2 to 4 are not bona fide transferees and that therefore are it is liable to be avoided at the option of the plaintiffs. The suit O.S No. 191 of 1981 was rightly decreed by the lower court. E.A No. 85 of 1981 was also therefore rightly dismissed. But this is not going to be of any benefit to the plaintiffs as we indicated earlier, as the property has subsequently been sold in court auction and purchased by Rosily. No doubt she is the wife of the second defendant, but that is of no assistance to the plaintiffs to proceed against the property. Though the plaintiffs have succeeded in their suit they are in effect having only the shadow of success.

27. It was mentioned that the plaintiffs could claim benefit of ratable distribution under section 73 of the C.P.C It is for them to claim fit if the requisite conditions are satisfied. We are not expressing any opinion on the point.

28. C.M.A No. 210 of 1986 is allowed and E.A No. 154 of 1986, Sub-Court Thrissur is dismissed. The parties will suffer their respective costs in this appeal. A.S No. 227 of 1985 and E.F.A No. 5 of 1985 are both dismissed with costs.

Iyyunni And Others v. Anto And Others

Judgment Summary — Viswanatha Iyer, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiffs' Arguments

First Defendant and Defendants 2–4 (Transferor and Transferees)

South Indian Bank (Decree-Holder) and Auction Purchaser (Rosily)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Iyyunni And Others v. Anto And Others

Comments