Supreme Court affirms finding of sham transaction in mortgage deed; sale and release deeds void.

The Supreme Court upheld the High Court's majority judgment, concluding that the usufructuary mortgage deed was a sham transaction without consideration, intended to defraud creditors. The sale deed and release deed were deemed void due to the fictitious insertion of a non-existent plot. The respondent retained possession of 'Krishna Bhavan' as the owner, leading to the dismissal of the appeal without any cost orders.

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Issues Involved:

1. Validity of the usufructuary mortgage deed dated May 20, 1921.
2. Validity of the sale deed dated November 23, 1925, and the release deed dated July 14, 1928.
3. Existence and fictitious insertion of a plot in the sale deed and release deed.
4. Possession of the property 'Krishna Bhavan'.

Detailed Analysis:

1. Validity of the Usufructuary Mortgage Deed Dated May 20, 1921:

The primary issue was whether the usufructuary mortgage deed executed by the respondent in favor of Smt. Dhanta Devi was a genuine transaction or a sham meant to defeat creditors. The trial court found that the respondent needed money during 1919-1921 and had executed promissory notes for the amounts mentioned in the mortgage deed. It concluded that Smt. Dhanta Devi had the necessary funds to make the advances and that the mortgage deed was for consideration and not fictitious. However, the High Court majority (Modi and Jagat Narain JJ.) disagreed, holding that the mortgage was a sham transaction without consideration, intended to defraud creditors. They noted that the respondent's financial position was relatively good, and the promissory notes were never produced. The Supreme Court upheld the High Court's majority view, emphasizing the lack of evidence for the promissory notes and the improbability of such a transaction given the respondent's financial situation.

2. Validity of the Sale Deed Dated November 23, 1925, and the Release Deed Dated July 14, 1928:

The trial court found these documents void due to the non-existence of a plot of land in Delhi mentioned in the documents. The High Court agreed with this finding. The Supreme Court noted that Mr. Gupta, representing the appellant, did not challenge the findings regarding these deeds. The sale deed and release deed were thus considered void transactions.

3. Existence and Fictitious Insertion of a Plot in the Sale Deed and Release Deed:

The trial court and the High Court found that the plot mentioned in the sale deed and release deed was non-existent and inserted fictitiously to facilitate registration in Delhi. This finding was not contested by the appellant in the Supreme Court, and thus, the transactions were deemed void.

4. Possession of the Property 'Krishna Bhavan':

The trial court found that Smt. Dhanta Devi had been put in possession of 'Krishna Bhavan' after the execution of the mortgage deed but allowed the respondent to occupy a portion for his residence. The High Court majority, however, concluded that the respondent continued to remain in effective possession of a large portion of 'Krishna Bhavan' and received its rents and profits. The Supreme Court upheld this view, noting that the evidence showed the respondent was in possession as the owner even after the mortgage deed's execution.

Conclusion:

The Supreme Court upheld the High Court's majority judgment, concluding that the usufructuary mortgage deed was a sham transaction without consideration, intended to defraud creditors. The sale deed and release deed were also void due to the fictitious insertion of a non-existent plot. The respondent remained in possession of 'Krishna Bhavan' as the owner, and the appeal was dismissed without any order as to costs.

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