CASE ANALYSIS:

Muniammal v. Thyagaraja Mudaliar & Anr.

[AIR 1958 Mad 580]

Submitted to: Submitted by:

Mrs. Tabassum Iqbal PULKIT AGARWAL

Associate Professor BCOM LLB (H) 2015-2020
SECTION B
Semester X
 ACKNOWLEDGEMENTS

On completion of this Project it is my present privilege with regard to acknowledge

my profound gratitude and indebtedness towards my teachers for their valuable
suggestions and constructive criticism. Their precious guidance and unrelenting
support kept me on the right track throughout the project. I gratefully acknowledge
my deepest sense of gratitude to:

Mrs. Tabassum Iqbal who provided me this wonderful opportunity, allotting the
project topic, and guided me throughout the project work;

I’m also thankful to the library and computer staffs of the University for helping me
find and select books from the University library.

Finally, I’m thankful to my family members and friends for the affection and
encouragement with which doing this project became a pleasure.

Pulkit Agarwal

Table of Content
1) INTRODUCTION...................................................................................................................................... 4

2) LEGAL PROVISIONS INVOLVED................................................................................................................ 4

3) FACTS OF THE CASE................................................................................................................................ 5

4) LEGAL ISSUES......................................................................................................................................... 6

5) ARGUMENTS OF THE PARTIES................................................................................................................ 6

a. On behalf of the Appellant........................................................................................................................6
b. On behalf of the Respondents...................................................................................................................6

6) JUDGMENT............................................................................................................................................ 7
a. Authorities on Fraudulent transfer of property........................................................................................7
b. Application on the present case................................................................................................................9

7) CRITICAL COMMENT & CONCLUSION.................................................................................................... 11

 INTRODUCTION

This project paper is an attempt with regard to analyse the judgement of the Madras
High Court in Muniammal v. Thyagaraja Mudaliar & Anr .,1 delivered by a single judge
bench comprising of Justice Ramaswami.

The case came in appeal before the High Court in second appeal against the order
and ruling of the District Judge, who had earlier modified the order of the District
Munsiff.

LEGAL PROVISIONS INVOLVED

The root of the matter dealt with section 53 of the Transfer of Property Act, 1882,
which provides a ruling against fraudulent transfer of property. The section is
reproduced below:

53. Fraudulent transfer. — (1) Every transfer of immoveable property made

with intent with regard to defeat or delay the creditors of the transferor
shall be voidable at the option of any creditor so defeated or delayed.
Nothing in this sub-section shall impair the rights of a transferee in
good faith and for consideration.
Nothing in this sub-section shall affect any law for the time being in
force relating with regard to insolvency.
A suit instituted by a creditor (which term contain a decree-holder
whether he has or has not applied for execution of his decree) with
regard to avoid a transfer on the ground that it has been made with
intent with regard to defeat or delay the creditors of the transferor
shall be inaugurated on behalf of, or for the benefit of, all creditors.
(2) Every transfer of immoveable property made without consideration
with intent with regard to defraud a succeeding transferee shall be
voidable at the option of such transferee.

A.I.R. 1958 Mad. 580.

 FACTS OF THE CASE

The factual matrix of the case occurred from 1949 to 1952. It can be summarized in
the following points:

 In the first illustration, Annamalai Mudaliar, the second respondent, had

become indebted with regard to his own sister Muniammal, the first
respondent, on a promissory note dated 16-8-1949.
 On the foot of that promissory note, the first respondent filed a suit against
the second respondent and obtained an instalment ruling on 20-9-1951, with
the first installment payable on 15-10-1951.
 The first respondent was taking steps with regard to attach the only property
belonging to the judgment-debtor second respondent viz., a soda-water
manufacturing shop run under the name and style of "Baby Soda Factory".
There was obstruction by the judgment-debtor more than once. The
attachment was duly effected on 8-4-1952.
 At this time the plaintiff, Thyagaraja Mudaliar, came forward with a claim
petition purporting with regard to have purchased the property in question
(the Baby Soda Factory) under a selling deed said with regard to have been
executed by the second respondent on 1-10-1951 and registered within a
week thereafter. The items of consideration for this selling deed were stated
with regard to be Rs. 155 (which Annamalai owed the Thyagaraja) and a sum
of Rs. 345 said with regard to have been paid in cash with regard to the
vendor, totaling Rs. 500.
 This claim petition was dismissed by the District Munsif. The plaintiff then
went in appeal with regard to the District Judge, who allowed the appeal
with regard to the limited extent of holding that the appellant has at least
established a right to a lien or charge upon the property conveyed. Thus,
although the District Judge agreed that the title of Mr. Thyagaraja could not
 be established on the property, he could still be in possession of it as he was a
prior creditor of Mr. Annamalai. This was apparently a relief granted in equity.

LEGAL ISSUES

The High Court, hearing the case on second appeal, framed the following two issues:

1. Whether the selling is a fraudulent conveyance brought into existence by the

plaintiff and the second respondent in collusion with regard to defraud the
decree-holder, Muniammal?

2. Whether any relief can be given with regard to the plaintiff (respondent) in
equity?

ARGUMENTS OF THE PARTIES

Although the judgement authored by Ramaswami, J. doesn’t mention the detailed

arguments of either of the parties with regard to the suit, the same can be inferred
from the facts of the case, the observations of the District Judge quoted in the
judgement and the court’s subsequent approach in dealing with the facts of the case.

On behalf of the Appellant

That the selling and transfer of property said with regard to have been executed by
the second respondent on 1-10-1951, is a fraudulent conveyance brought into
existence by the plaintiff and the second respondent in collusion with regard to
defraud the decree-holder, Ms. Muniammal. Since Ms. Muniammal had already
obtained the ruling in September 1951 and the Thyagaraja only claims with regard to
have brought the property in October 1951, the title of the appellant cannot be
questioned. Further, no equitable relief can be granted with regard to Mr. Thyagaraja
either as his conduct, prima facie, amounts with regard to collusion with the other
respondent in order with regard to defraud a bona fide creditor.

On behalf of the Respondents

The selling and transfer of property executed on 1-10-1951 is valid and not a
fraudulent conveyance as the Mr. Thyagaraja brought the property in good faith, not
being aware of the ruling passed in respect with regard to it. This is further
evidenced by the fact that Mr. Thyagaraja was a prior creditor of the second
respondent. Further, Mr. Thyagaraja has at least established a right of lien upon the
property, as he was a bona fide purchaser and had an outstanding debt of Rs. 500
with the second respondent, if his initial claim is defeated.

JUDGMENT

Ramaswami, J., in his judgement, referred to various authorities on fraudulent

conveyance of property, stating that certain broad indicia have been formulated in
England, America and India regarding this issue. On consideration of these
authorities he also remarked: “It is surprising how human nature is the same all the
world over, irrespective of colour, creed and race.”

However, the judge prefaced his statements by stating that the factors which
constitute a fraudulent conveyance must necessarily depend upon the circumstances
of each case.

Authorities on Fraudulent transfer of property

Halsbury's Laws of England 2

Halsbury's Laws of England (Simonds Edition), Volume 17 page 657 (para 1269).
 There are a number of circumstances which weigh with the Court in
determining whether, in any particular case, there were an intent with
regard to defraud creditors. The strongest of these indications, or badges,
of fraud is the continuance of the grantor in possession of the property he
has purported with regard to alienate, when such continuance in
possession is not in accordance with the tenor and object of the
conveyance; and even though the grantee is let into possession jointly
with the grantor, the presumption of fraud will still be raised. Continuance
in possession is not, however, evidence of fraud where the possession is
consistent with the nature of the grant, as in the case of a mortgage; but
retention of the title deeds of the property granted is an indication of a
fraudulent intent.
Other indications of a fraudulent intent are the fact that the alienation
comprises substantially the whole of the property of the grantor; in the
case of an alienation of shares, that a call has been made upon them; that
the alienation is made after a writ has been issued against the grantor, or
after execution has been issued; that the conveyance by which it is
effected contains an unnecessary statement with regard to the effect that
it were made without a fraudulent intent; that the conveyance contains a
false recital, though this will not be conclusive against a party who did not
know that the recital were false: or that the grantor reserved with regard
to himself a power of revocation.3

Dhodi, Law of Fraud and Fraudulent Transfers in India 4

Badges of fraudulent conveyances

(1) The strongest indication is the continuance of the grantor in
possession of the property where such possession is not under or
consistent with the deed of conveyance even if the possession be jointly
with the grantee, except where the grantor and grantee are husband and
wife. The mere fact of having some interest in property would not render
it void.

Twyne's case (1602) 1 Smith LC (13th Edn.) 1 (A); Morris v, Morris, (1895) AC 625 (B); Sanders v. Crossley,
(1919) 2 Ir R 71 (C); Perry-Herrick v. Attwood, (1857) 27 LJ Ch 121 (D); Re Hirth; Ex parte Trustee, (1899)
1 QB 612 (E); Re Troughton, (1894) 71 LT 427 (F); Alton v. Harrison; Poyser v. Harrison, (1869) 4 Ch A 622
(G); Edmunds v. Edmunds, (1904) P. 362 (H): Pearce v. Bulteel, (1916) 2 Ch 544 (1): Re Baker, (1936) Ch 61
(J); Re Hooker's Settlement (1954) 3 All ER 321 (K).
4

Daulat Ram Dhodi, “Law of Fraud and Fraudulent Transfers in India”, Second edition, page 205.
(2) The retention of title deeds of the property alienated, by the alienor
would render it void.
(3) Indebtedness is a very strong evidence though not conclusive proof of
fraudulent intention.
(4) Alienation of substantially the whole of the property of the grantor
e.g., gift of all before attachment.
(5) Alienation made after issue of warrant of attachment, after notice of
suit, after injunction in execution: and soon after decree.
(6) False recital, known with regard to be false, made in the deed of
alienation, e.g., (i) fictitious items mentioned in a deed giving preference
with regard to a creditor, (ii) only part of the consideration recited having
been paid.
(7) The grantor reserving with regard to himself a power of revocation.
Mere fact of having some interest in the property would not render it
void.
(8) The deed of alienation contained an unnecessary statement with
regard to the effect, that the alienation were being made without any
fraudulent intent.
(9) A transfer having in effect delved creditors is not void, unless there be
inadequate consideration or other facts raising presumption of fraud.
(10) Lack of passing of consideration mentioned its the deed when taken
with other facts may go with regard to show the deed with regard to be a
sham one, not passing anything.

The intention of the parties with regard to a transaction and the nature of
interest thereby created can be determined from the following factors :

(1) Motive of entering into a benami transaction may be with regard to

defeat an impending execution. The motive of defeating an impending
execution does not affect a transfer effected with regard to prefer one
creditor upon another. It does not amount with regard to a transfer
intended with regard to defeat all the creditors. It does not render a bona
fide transfer for adequate consideration, void. Such an intent is not one
amounting with regard to defraud, delay or defeat creditors within S. 53 ,
Transfer of Property Act.
(2) Position of the parties with regard to the transaction, their condition,
state and rank and the direct tendencies of the transfer are circumstances
determining their intention.
(3) Previous or subsequent conduct of the parties, the possession of the
property in question; the possession of title deeds of the property, are
factors on the point of intent.
 (4) Relationship of the parties with regard to one another, as father and
sons, or husband and wife, or a transfer with regard to an employee of
the transferor's legal adviser, transfer with regard to uncle, transfer with
regard to brother; go with regard to decide the question of intention.
Mere relationship is not enough.
(5) The source or adequacy of purchase money determines intent..." 5

Application on the present case

The Court then went on to apply these principles in the present case. Ramaswami, J.
found the following occourances which, in his opinion, pointed with regard to the
transfer in the question being a fraudulent one:

1. Firstly, this conveyance came into actuality after Muniammal had started
proceedings with regard to realize her debt.
2. Secondly, this is the only piece of property which the judgment-debtor
possessed in this world.
3. Thirdly, in the selling deed Ex. A-1 no provision has been made for discharging
the ruling debt of Muniammal.
4. Fourthly, the vendee plaintiff has been hedging alternately that he made no
enquiries regarding the indebtedness of the vendor and that the vendor
apprised him of his indebtedness. In either event the fraudulent intent of this
vendee would stand made out.
5. Fifthly, it has been established that this Baby Soda Factory is worth Rs. 1,000
and more and has been purported with regard to be sold for Rs. 500.
5

Har Prasad v. Mohammad Usman, MANU/UP/0002/1942 : AIR 1943 All 2 (L); Bhikabhai Muljibhai v.
Panachand, (MANU/MH/0043/1919 : ILR 43 Bom 707: AIR 1919 Bom 99) (M); Gopal v. Bank of Madras,
ILR 16 Mad 397 (N); Muthu K. R. V. Alagappa Chetty v. Dasappa Chettiar, 1913 Mad WN 141 (O);
Chidambaram Chettiar v. Sami Iyer, ILR 30 Mad 6 (P), Solema Bibi v. Hafez Mahammad Hossein,
MANU/WB/0285/1927 : AIR 1927 Cal 836 (Q); Gopichand v. Jodhraj Deojit, MANU/UP/0310/1929 : AIR
1929 All 458 (R); Narayana Pattar v. Viraraghavan Pattar, ILR 23 Mad 184 (S); V.V. Rajabhadar Mudaliar v.
Thiruvengada Mudaliar. MANU/TN/0386/1927 : AIR 1928 Mad 20 (1) (T); Gaya Prasad v. Murlidhar,
MANU/UP/0222/1927 : AIR 1927 All 714 (U); Maung Din v. Ma Huin Me, AIR 1925 Rang 227 (V);
Mohideen Tharagan v. Muhammad Mustappah Rowther, MANU/TN/0551/1929 : AIR 1930 Mad 665 (W);
Bhagwant v. Kedari, ILR 25 Bom 202 (X); Atmaram Udhavdas v. Dayaram Sawney, AIR 1929 Sind 94 (Y);
Ghunsham Das v. Urna Pershad, 50 Ind Cas 264: (AIR 1919 PC 6) (Z); ML Amina Begam v. Sheo Prasad,
MANU/OU/0038/1931 : AIR 1931 Oudh 344 (Z1): Mrs. N. Johnstone v. Gopal Singh, MANU/LA/0295/1931
: AIR 1931 Lah 419 (Z2).
 6. Sixthly, subsequent with regard to this alleged purchase, possession of the
Soda Factory has been with the vendor and it has been managed through his
son.

Keeping these occourances in mind, the Court held that it was clear that this was a
case of fraudulent transfer of property and therefore section 53 of the Transfer of
Property Act is attracted and the transfer is voidable at the instance of Ms.
Muniammal.

With regard with regard to Mr. Thyagaraja’s claim of equitable relief, the court
applied the maxim "he who seeks equity must do equity". In this case the selling
deed itself is not supported by consideration with regard to the extent of Rs. 500 as
concluded by the learned District Judge. On the other hand, the evidence as analysed
by the District Munsif clearly shows that cash consideration of Rs. 345 did not pass.

Therefore, when the entire transaction is a fraudulent one brought about in collusion
by the vendor and vendee in order with regard to defraud an innocent third party,
the claimant is not entitled with regard to any equity in his favour.
 CRITICAL COMMENT & CONCLUSION

This judgment of the Madras High Court is essential because it elucidated the general
principles with regard to be applied in cases of fraudulent transfer of property under
section 53 of the Transfer of Property Act after a comprehensive analysis of
authorities from several jurisdictions, including India. The Court also laid down that
the factors which constitute a fraudulent conveyance must necessarily depend upon
the circumstances of each case, therefore warning future judges that no approach
can be full evidence and law ultimately depends upon how it is applied in any given
case.

The importance of the judgment can also be gauged from the fact that it is referred
to by nearly all textbooks and treatises on Property Law in India in glowing terms.
Justice Ramaswami’s dicta, “It is astonishing how human nature is the same all the
world over, irrespective of colour, creed and race” is well representative of the
human race and the role of the property law in securing integrity and restoring
equity in society.