Musahar Sahu and Another vs Hakim Lal and Another (1915) || Case Summary
- Sambhav Chhabra
- 1 day ago
- 3 min read
Musahar Sahu and Another vs Hakim Lal and Another
Musahar Sahu and Another vs Hakim Lal and Another
Facts
Kishun Benode was a debtor. Musahar Sahu, the plaintiff, was a creditor who sued for the debt on December 14, 1900, and later on January 5, 1901, presented a petition to secure the debt via attachment before judgment. On February 11, 1901, Kishun Benode filed an affidavit stating he wouldn't transfer his properties, and the attachment petition was dismissed.
Despite his affidavit, Kishun Benode executed two "kobalas" (conveyances/sale deeds) on September 2, 1901:
One in favor of Kamta Prashad (his nephew and a minor, whose guardian was Ram Aotar Lal). The consideration for this deed was later found to be fictitious (a debt of Rs. 6,335).
The other in favor of Hakim Lal (Kamta Prashad's uncle and Ram Aotar Lal's brother). The consideration for this deed was found to be real.
On December 5, 1901, the plaintiff, Musahar Sahu, obtained a judgment against Kishun Benode for his debt. The transferees (Kamta Prashad and Hakim Lal) had their names registered for the properties on June 11, 1902.
Musahar Sahu subsequently brought two suits to set aside the two kobalas, arguing they were made with the intent to defeat or delay him, as a creditor.
Issues
Whether the two kobalas, executed on the same day, should be treated as a single transaction, meaning the second (real) transfer should fail because the first (fictitious) one was fraudulent.
Whether the transfer in favor of Hakim Lal was voidable under the relevant law simply because the debtor, Kishun Benode, intended to prefer one creditor (Hakim Lal) over another (Musahar Sahu), or even intended to defeat an anticipated execution by the plaintiff.
Laws Involved
Law/Provision | Summary |
Section 53 of the Transfer of Property Act, 1882 | This section essentially deals with fraudulent transfers. It stipulates that a transfer of immovable property made with the intent to defeat or delay the creditors of the transferor is voidable at the option of any creditor so defeated or delayed. |
Principle from Bankruptcy Law (Non-Applicability) | The court referenced the principle that outside of the law of bankruptcy, a debtor is generally allowed to pay one creditor in full and leave others unpaid, even if the result is that other creditors' claims cannot be satisfied. A simple preference of one creditor over another is not considered a "fraud" under Section 53. |
Judgement
The Privy Council (Their Lordships) dismissed the appeal, upholding the second kobala in favor of Hakim Lal.
On the "One Transaction" Issue: The Court rejected the contention that the two deeds (kobalas) formed a single transaction, stating that the transfer to Hakim Lal "must stand or fall on its own merits." The fact that the first transfer was fraudulent did not automatically make the second one fraudulent as well.
On Preferring Creditors: The Court held that merely preferring one creditor over another (even if it defeats another creditor's anticipated execution) is not a fraud under the statute (Section 53 of the Transfer of Property Act) when the law of bankruptcy does not apply.
A transfer is considered voidable under Section 53 if it's an instrument that removes property to the benefit of the debtor or involves the debtor retaining a benefit for himself.
The transfer to Hakim Lal was for a real consideration and was made for the satisfaction of a genuine debt. Since the debtor did not retain any benefit, and no issue of bankruptcy was raised, the payment being made to the preferred creditor, Hakim Lal, was not grounds for impeaching the transfer.
Final Decision: The appeal was dismissed with costs. The transfer in favor of Hakim Lal was upheld as valid.
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