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Case Number
Advocates
  • Mr. J.T Woodroffe, Mr. W.C Bonnerjee and Babu Upend a Nath Mitter for the Appellant;
  • Mr. Jackson and Babu Girija Sunker Mazumdar for the Respondents.
Judges
  • Maclean, C.J
  • Banerjee, J.
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Mr. J.T Woodroffe, Mr. W.C Bonnerjee and Babu Upend a Nath Mitter for the Appellant;
  • Mr. Jackson and Babu Girija Sunker Mazumdar for the Respondents.
Judges
  • Maclean, C.J
  • Banerjee, J.
Acts
See more information ...
Smart Summary

Structured Summary of the Opinion (Banerjee, J.; Maclean, C.J., concurring)

Factual and Procedural Background

The Plaintiff (Appellant) brought a suit seeking a declaration of title to, and confirmation of possession of, an eight-annas share of a jote. The Plaintiff alleged that this share originally belonged to Defendants 5 and 6 and that he purchased it from them by a registered deed of sale for Rs. 1,000 on the 18th Pous 1297. Defendant No. 4, holding a decree against Defendants 5 and 6, attached the said share; the Plaintiff's claim in the execution proceedings was disallowed and the property was sold in execution and purchased by Defendants 1 to 3 on 21 March 1891. Two additional persons were initially made defendants but were subsequently removed at the Plaintiff's instance.

The suit was defended by Defendants 1 to 4, who denied that the Plaintiff's purchase was a real and bona fide transaction. The first Court found the purchase to be nominal and intended to defeat Defendant No. 4's claim and dismissed the suit. On appeal the lower Appellate Court found that the Plaintiff had purchased the property but not in good faith, and affirmed the dismissal. The present opinion arises on second appeal from that judgment.

Legal Issues Presented

  1. Whether, under section 53 of the Transfer of Property Act, a transferee for value who had knowledge of an impending execution against the transferor can nonetheless be regarded as a transferee "in good faith" if he does not share the transferor's intention to defeat or delay creditors.
  2. Whether mere awareness by the transferee of an impending execution against the transferor is, as a matter of law, sufficient to vitiate the transfer for want of good faith.
  3. Whether the lower Appellate Court's finding that the Plaintiff's purchase was not in good faith is a factual finding binding on this Court in second appeal, or whether that conclusion rests upon an incorrect application of the law and therefore requires review/remand.

Arguments of the Parties

Appellant's Arguments

  • The lower Appellate Court erred in law in holding that the Plaintiff's knowledge that Defendant No. 4 had taken out or was about to take out execution against Defendants 5 and 6 was sufficient to render the purchase not in good faith.
  • What is necessary for a purchase to be in good faith is that it be real and for value; a bona fide purchase for value should be upheld even if the purpose was to defeat or delay creditors. In support, the Appellant relied on several cases (for example, Wood v. Dixie; Hale v. Saloon Omnibus Co.; Ramburun Singh v. Jankee Sahoo; V. Sunkatappa v. D. Kammayya; Suba Bibee v. Balgobind Das; Sakharam v. Dawud).

Respondents' Arguments

  • The question whether a purchase is in good faith is a question of fact. The lower Appellate Court found that the Plaintiff's purchase was not in good faith and that finding is not open to interference in second appeal. The respondents relied on Durga Chowdhurani v. Jowahir Singh for this proposition.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Wood v. Dixie That a transfer for good consideration was not void merely because made with intent to defeat an expected execution of a judgment creditor (English authority under 13 Elizabeth c. 5). The Court noted this English authority but observed that such cases do not support the Appellant's extreme contention; English statute language differs and Indian law (sec. 53) goes further.
Hale v. Saloon Omnibus Co. Similar English authority to Wood v. Dixie on transfers for consideration despite intent to defeat execution. Used to show English decisions adopt a narrower rule than the Appellant's contention; the court treated them as not controlling the Indian statute's wider reach.
Ramburun Singh v. Jankee Sahoo Authority supporting the view that mere knowledge of impending execution by the transferee is not by itself sufficient to deprive him of good faith. The Court cited this case as supporting its view that knowledge alone does not necessarily vitiate good faith where the transferee does not share the transferor's fraudulent intent.
V. Sunkatappa v. D. Kammayya One of several cases relied upon by the Appellant regarding bona fide purchase for value (no specific rule quoted in the opinion). The Court observed these cases were cited by the Appellant but did not accept that they justified the extreme contention that sharing a transferor's intention to defeat creditors would still be "good faith" under sec. 53.
Suba Bibee v. Balgobind Das One of the cases relied on by the Appellant (no detailed rule set out in the opinion). Referenced as part of appellant's authorities; the Court did not find these to support the asserted broad proposition.
Sakharam v. Dawud One of the cases cited by the Appellant (no detailed rule set out in the opinion). Referenced but not treated as supporting the Appellant's extreme contention that a transferee sharing the transferor's intent remains in good faith.
Durga Chowdhurani v. Jowahir Singh Authority for the proposition that questions of good faith are questions of fact and a lower court's factual finding is not normally open to review in second appeal. Cited by respondents; the Court considered the principle but examined whether the lower court's conclusion depended upon an erroneous legal view (in which case review/remand would be appropriate).
Lachmeswar Singh v. Manowar Hossein Cited in support of the Court's view on the correctness of reviewing a lower appellate conclusion when it rests on an incorrect view of law. Used as supporting authority for the proposition that if a lower Appellate Court's conclusion is based on erroneous legal inference, the judgment can be questioned in second appeal.
Ramgopal v. Shamhaton Cited alongside Lachmeswar Singh to support review where law was misapplied. Referred to for the same purpose: supporting the Court's view that an appellate finding based on incorrect legal premises is open to correction.

Court's Reasoning and Analysis

The Court began by identifying the statutory provision controlling the dispute: section 53 of the Transfer of Property Act, which makes transfers of immovable property made with intent to defeat or delay creditors voidable at the option of persons so defeated or delayed, but preserves the rights of any transferee "in good faith and for consideration."

The Court analyzed section 53 as a whole and concluded that its purpose is to protect an innocent transferee for value even when the transferor is motivated by a desire to defeat or delay creditors, provided the transferee does not share in that design.

The Court then considered whether mere knowledge by the transferee of an impending execution against the transferor is sufficient, by itself, to make the transfer not in good faith. The Court held that mere knowledge of impending execution does not suffice to turn a transferee for value into one not in good faith if the transferee does not share the transferor's intention to defeat or delay creditors. This conclusion was supported by authority (notably Ramburun Singh v. Jankee Sahoo) and by reasoning that it would be contradictory to treat a purchaser as "in good faith" if he accepted the transfer with the object of helping the transferor to convert immovable property into money for concealment and defeat of creditors.

The Court rejected the Appellant's extreme submission that a real purchase for value should be treated as in good faith even where the transferee shares the transferor's intention to defeat creditors. The Court observed that the English cases under 13 Elizabeth c. 5 (e.g., Wood v. Dixie; Hale v. Saloon Omnibus Co.) do not sustain that extreme view and that Indian law under section 53 is more stringent.

The Court noted an important factual/legal distinction: if the lower Appellate Court had in fact found that the Plaintiff shared the vendors' intention to defeat or delay creditors, such a factual finding would be binding on second appeal. But if the lower Appellate Court merely found that the Plaintiff was aware of the impending execution and, on that basis alone, concluded the purchase was not in good faith, that conclusion would rest upon an incorrect legal principle (i.e., equating mere knowledge with lack of good faith) and would be open to question in second appeal.

Applying this analysis to the judgment below, the Court interpreted the lower Appellate Court's reasoning as having concluded the purchase was not in good faith solely because the Plaintiff was aware of the impending execution. The Court regarded that as an erroneous application of the law and therefore remanded the case to the lower Appellate Court to determine the critical factual question: whether the Plaintiff purchased with the object of enabling the vendors to defeat or delay Defendant No. 4, or with knowledge that they intended to do so. The Court directed that if the lower Appellate Court finds the Plaintiff shared the vendors' intent, the suit must be dismissed; if it finds he did not, the Plaintiff will be entitled to a decree.

Holding and Implications

Appeal allowed; case remanded.

Direct consequences for the parties as stated by the Court:

  • If on remand the lower Appellate Court finds that the Plaintiff purchased the property with the object of enabling Defendants 5 and 6 to defeat or delay their creditor (Defendant No. 4), the suit must be dismissed.
  • If on remand the lower Appellate Court finds that the Plaintiff did not share the vendors' intention and did not purchase with that object, the Plaintiff will be entitled to a decree.
  • Costs were ordered to abide the result.

Broader legal implication, as explained by the Court (limited to what appears in the opinion): the Court clarified the interpretation of "good faith" in section 53 of the Transfer of Property Act to the effect that mere knowledge of an impending execution is not by itself sufficient to impeach a transferee's good faith; rather, the transferee's own intent or participation in the transferor's design to defeat or delay creditors must be shown. The Court emphasized that English authorities under 13 Elizabeth c. 5 are not dispositive of Indian law, which goes further in the protection against transfers made to defeat creditors.

S.C.S. (signature block in original). Appeal allowed; case remanded to the lower Appellate Court for the specific factual determination described above.

Show full summary ...

    Ishan Chunder Das Sirkar v. Bisoo Sirdar

    The Judgment of the Court was delivered by

    Banerjee, J.:— (Maclean, C.J, concurring). This appeal arises out of a suit brought by the Plaintiff (Appellant) for declaration of his tide to, and for confirmation of possession of, an eight-annas share of a certain jote, on the allegation that the said share, which belonged originally to Defendants 5 and 6, was purchased by the Plaintiff from these Defendants for Rs. 1,000, on the 18th Pous 1297, under a registered deed of sale; that Defendant No. 4 having, in execution of a decree held by him against Defendants 5 and 6, attached the said share, the Plaintiff preferred a claim, but the same was disallowed; and that the property was sold in execution of the decree of the Defendant No. 4 and purchased by Defendants 1 to 3 on the 21st March 1891. Two other persons were made Defendants in the case, but subsequently, at the Plaintiff's instance, their names were removed from the record.

    The suit was defended by Defendants 1 to 4, and their defence, so far as it is necessary to be considered for the purposes of the present appeal, was a denial of the Plaintiff's purchase as a real and bona fide transaction.

    The first Court found that the purchase of the Plaintiff was not a real and bona fide transaction, but was merely a nominal one, resorted to with the object of defeating the claim of Defendant No. 4, and it accordingly dismissed the suit.

    On appeal by the Plaintiff, the lower Appellate Court has found that the Plaintiff purchased the property, but not in good faith, and it has accordingly affirmed the decree of the first Court dismissing the suit.

    In second appeal, it is contended for the Plaintiff, that the decision of the lower Appellate Court is wrong in law because the mere circumstance of the Plaintiff having been aware of the fact that the Defendant No. 4 had taken out or was going to take out execution against Defendants 5 and 6, was not sufficient to make his purchase one not in good faith, as the lower Appellate Court has held. It is further contended that the only thing necessary to constitute a purchase in good faith was that the purchase should be real and for value, and a real purchase for value, even if it was with the object of defeating or delaying creditors would still be a purchase in good faith, and entitled to be upheld, and, in support of this contention, the cases of Wood v. Dixie , Hale v. Saloon Omini-bus Co. (3), Ramburun Singh v. Jankee Sahoo , V. Sunkatappa v. D. Kammayya (4), Suba Bibee v. Balgobind Das (5), Sakharam v. Dawud (6) are relied upon.

    On the other hand, it has been argued for the Respondents that the question of good faith is a question of fact, and the lower Appellate Court having found that the purchase of the Plaintiff was not in good faith, it is not open to this Court to interfere with its judgment in second appeal; and in support of this argument the case of Durga Chowdhurani v. Jowahir Singh (7) is referred to.

    Now, the validity of the purchase under which the Plaintiff claims is to be determined with reference to sec. 53 of the Transfer of Property Act, which enacts that “every transfer of immoveable property,” (I am only quoting so much of the section as is applicable to the present case) “made with intent to defeat or delay the creditors of the transferor is voidable at the option of any person so defeated or delayed.” And then, after laying down a rule of evidence, the section further proceeds:— “Nothing in this section shall impair the rights of any transferee in good faith and for consideration.”

    Reading this section as a whole, then, what it means, so far as it is applicable to a case like the present, is this, that where a transfer of immoveavle property is made with intent to defeat or delay any creditor of the transferor, it is voidable at his option, but where a transferee for value takes the property in good faith, that is, without being a party to any design on the part of the transferor to defeat or delay his creditors his rights shall not be impaired by anything contained in the section.

    The words “good faith” have not been defined in the Act, nor is there any definition of the expression in the General Clauses Act of 1868, which was in force when the Transfer of Property Act was passed.

    But a consideration of the section, taken as a whole, leads me to the view I have taken, that the object of the last paragraph of sec. 53 is to protect an innocent transferee for value, notwithstanding that the transferor may be actuated by a desire to defeat or delay his creditors.

    But there arises a further question, whether, where a transferee for value has knowledge of an impending execution against the transferor, such knowledge itself is sufficient to vitiate the transfer and make it one not in good faith, notwithstanding that the transferee may not be aware of any intention on the part of the transferor to defeat or delay his creditors, and notwithstanding that he may honestly believe that the sale is resorted to for the purpose of paying the creditors.

    I am of opinion that mere knowledge of an impending execution against a transferor is not sufficient to make the transferee a transferee other than in good faith, when he does not share the intention of the transferor to defeat or delay his creditors.

    This view is fully supported, not only by reason, but also by authority. See the case of Ramburun Singh v. Jankee Sahoo . I am not prepared, however, to aceept as correct the extreme contention urged on behalf of the Appellant, that all that was necessary to constitute a transferee in good faith within the meaning of sec. 53, was that the transfer should be real, and that, although the transferee might share the intention of transferor to defeat or delay creditors, he would still be a transferee in good faith. It cannot be said that a transferee for value who accepts the transfer for the purpose of helping the transferor to convert his immoveable property into money, which can easily be concealed and kept out of the reach of his creditors, and thus defeat or delay the creditors, is a transferee in good faith within the meaning of sec. 53. I do not think that the cases cited support this view. They are cases under 13 Elizabeth, c. 5, and though that statute forms in part the ground work of sec. 53 of the Transfer of Property Act, its language is different, and the Indian law goes much further than the English statute. In the case of Wood v. Dixie , it was held that a transfer of property for good consideration was not void, merely because it was made with intent to defeat the expected execution of a judgment creditor; and the same view was taken in the case of Hale v. Saloon Omnibus Co. , but they do not go so far as the Appellant's contention goes. Indeed, it would almost be a contradiction in terms to say that a transferee for value, who takes the transfer with the intention of helping the transferor to convert his immoveable property into money which can easily be concealed, and thus to defeat or delay his creditors, should nevertheless be treated as a transferee in good faith, and the transfer to him should be upheld though sec. 53 says that a transfer made with such intention is voidable at the option of the creditors. Where the transferee is a creditor of the transferor and accepts the transfer in satisfaction of the debt due to him, though with the knowledge that his doing so has the effect of defeating other creditors of the transferor, the transfer may come within the last paragraph of sec. 53 of the Transfer of Property Act. But that is not the case before us, and it is unnecessary to say more on this point.

    There arises then the question whether the Court of Appeal below has come to a finding that the purchase of the Plaintiff was not in good faith, so as to preclude this Court from interfering in second appeal.

    No doubt, if the lower Appellate Court has found upon the evidence that the Plaintiff was not only aware of the impending execution of decree against his vendors, but also shared the intention of his vendors to defeat or delay that execution, the finding would be unassailable in second appeal. But, if after having found that the intention of the vendors was to defeat or delay their creditors, and that the Plaintiff was only aware of an impending execution against the vendors and nothing more, the lower Appellate Court has come to the conclusion that the Plaintiff's purchase was one not in good faith, then that conclusion is an inference based upon this view of law, that mere knowledge on the part of the transferee that there is an impending execution couped with an intention on the part of the transferor to defeat or delay his creditors — an intention not known to the transferee — necessarily makes the purchase one other than in good faith, a view of the law, which, as I have shown above, is erroneous. And, if that be so, the judgment is open to question in second appeal.

    In support of this view I may refer to the cases of Lachmeswar Singh v. Manowar Hossein (8) and Ramgopal v. Shamhaton (9).

    Now, as I understand the judgment of the learned Judge below, he has not come to any finding that the Plaintiff shared the intention of Defendants 5 and 6 to defeat or delay their creditors but he has come to the conclusion that the Plaintiff's purchase was not in good faith, because he found that the Plaintiff was aware of the impending execution of decree against Defendants 5 and 6 by Defendant No. 4, and of that alone. But, as I have said above, such knowledge may be consistent with good faith in the Plaintiff, and the purchase by the Plaintiff will not be vitiated on the ground of bad faith, unless it can be clearly proved that the purchaser was a party to a design of his vendors to defeat or delay their creditors. I should add that I do not think that the learned Judge below was right in importing into sec. 53 the definition of constructive notice given in sec. 3 of the Act.

    In this view it becomes necessary to remand the case to the lower Appellate Court, in order that it may determine the question whether the Plaintiff purchased the property in dispute from Defendants 5 and 6 with the object of enabling them to defeat or delay their creditor the Defendant No. 4, or with the knowledge that they intended to do so.

    If he come to an affirmative finding on that question, the suit must be dismissed. If he come to a negative finding, the Plaintiff will be entitled to a decree.

    Costs will abide the result.

    S.C.S
    Appeal allowed; case remanded.

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    Comments

    Ishan Chunder Das Sirkar v. Bisoo Sirdar
    (May 17, 1897)