1963 (1) TMI 52 - SC - Indian Laws

Supreme Court Upholds High Court Decree on Sham Transactions

The Supreme Court affirmed the High Court's decree, dismissing the appeal with costs. It upheld findings that the hypothecation bond assignment and sale ... - Issues Involved:1. Validity of the hypothecation bond assignment.2. Whether the decree in O.S. No. 59 of 1093 was a nullity due to being time-barred.3. Limitation period for instituting the suit.4. Whether the suit is governed by Article 142 of the Limitation Act.5. Validity of the sale deed executed by Ittiyavira in favor of the appellant.6. Whether the High Court's judgment should have been delivered by a Bench of three judges.Issue-Wise Detailed Analysis:1. Validity of the Hypothecation Bond Assignment:The core dispute revolves around the assignment deed (Ex. V) executed by Ramalinga Iyer in favor of Sankara Rama Iyer. The respondents contended that this deed was a sham document intended to shield the hypothecation bond from creditors. The High Court agreed, noting the lack of evidence showing that the assignee ever attempted to realize the amounts due under the bond over a 32-year period. The appellant's failure to produce evidence of the debts recited in the document or to show that Sankara Rama Iyer accepted the assignment further supported the finding that Ex. V was not genuine.2. Whether the Decree in O.S. No. 59 of 1093 was a Nullity:The appellant argued that the decree in O.S. No. 59 of 1093 was a nullity because the suit was barred by time. The Court held that even if the suit was time-barred, the decree could not be treated as a nullity. The proper remedy for an aggrieved party is to appeal the decree. The Court emphasized that jurisdiction over the subject matter and parties does not cease merely because of an erroneous decision on a vital issue.3. Limitation Period for Instituting the Suit:The appellant claimed that the suit was barred as it was not filed within three years of the Magistrate's decision. However, the respondents initially filed the suit in the Munsiff's Court within the limitation period, and it was later transferred to the District Court. The Court held that under Section 14 of the Limitation Act, the respondents were entitled to exclude the time spent in prosecuting the suit in the Munsiff's Court. The appellant's failure to raise a specific plea of limitation in the trial court and the High Court further weakened their argument.4. Whether the Suit is Governed by Article 142 of the Limitation Act:The appellant contended that the suit was governed by Article 142 of the Limitation Act and was barred as the respondents had not established possession within 12 years. The Court found that actual possession was delivered to the auction-purchaser on 12-7-1099, supported by the evidence of witnesses and the presumption of regularity in court records. The appellant's possession was deemed to have originated in trespass after this date.5. Validity of the Sale Deed Executed by Ittiyavira:The sale deed (Ex. XXIX) executed by Ittiyavira in favor of the appellant was contested as a sham transaction. The High Court found that the consideration recited in the document was suspicious and lacked proof. The appellant's inconsistent statements about the source of funds and the implausibility of a 14-year-old brother loaning Rs. 500 further supported the finding that Ex. XXIX was not genuine. The Court concluded that the appellant's possession was merely as an agent of Ittiyavira.6. Whether the High Court's Judgment Should Have Been Delivered by a Bench of Three Judges:The appellant argued that the appeal should have been heard by a Bench of three judges as per the Travancore High Court Act, 1099. The Court held that the High Court of Travancore was abolished and replaced by the High Court of Travancore-Cochin, governed by new laws. The right to have an appeal heard by a specified number of judges is procedural, and the appeal was rightly heard by a Bench of two judges. The Court dismissed this contention, affirming that no right of the appellant was infringed.Conclusion:The Supreme Court affirmed the High Court's decree and dismissed the appeal with costs. The Court upheld the findings that the hypothecation bond assignment and the sale deed were sham transactions and that the suit was not barred by limitation. The judgment emphasized the principles of jurisdiction, procedural law, and the presumption of regularity in court records.