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
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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
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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

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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.
For the reasons of this sub-section, no transfer made without consideration
shall be deemed with regard to have been made with intent with regard to

A.I.R. 1958 Mad. 580.

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defraud by reason only that a subsequent transfer for consideration was

made.
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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
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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

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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
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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

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

Halsbury's Laws of England (Simonds Edition), Volume 17 page 657 (para 1269).
3

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
Muniammal v. Thyagaraja Mudaliar & Anr.
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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.
(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

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.
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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.
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).
Muniammal v. Thyagaraja Mudaliar & Anr.
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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.
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
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defraud an innocent third party, the claimant is not entitled with

regard to any equity in his favour.
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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.