1964 (9) TMI 4

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....lipalayam village, adjoining Salem Town. Besides, he had substantial balances in his bank accounts during the period material to the present case. There was also a terraced house owned by him in Guthiana in the State of Kutch. Abu Bucker had two wives and children by them. The senior wife was living at Guthiana, while the junior wife and children born of her were with him (the second respondent) at Yercaud. The objects of his affection were only his wives and children, as is evident from the fact that under a registered will dated November 29, 1945, he disposed of his entire properties in their favour. It is claimed on behalf of the appellants that soon after the execution of the will, the second respondent realised that under the Mohammedan law its provisions could not stand to the extent of two-thirds of the properties disposed of and that, therefore, he wanted to execute a deed of gift in favour of his minor children by his second wife, namely, the appellants. In pursuance of that object he is said to have executed exhibit A-9 settling the Grange Coffee Estate on the appellants. The reason given for the execution of this gift deed does not, however, appear to be correct. For, if....

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....o the gift under exhibit A-9, released the properties from attachment. Thereupon, the suit, out of which this appeal arises, was instituted by the first respondent for setting aside that summary order. The gift deed was attacked on the ground that it was a sham document and that, even otherwise, possession not having been delivered, no title passed to the donees. There was also a further contention that it could not avail against the first respondent, as it was conceived for the purpose of defeating and delaying the creditors of the donor. The learned subordinate judge found that the gift deed was a real transaction and that it was sufficient for the purpose of its validity that there was a declaration on the part of the donor that he had made over possession to his minor sons. The correctness of this finding has not been challenged before us. The learned subordinate judge, however, found, on the other question, that the gift deed was executed with a view to defraud the creditors of the donor. On this view, he set aside the order made in the claim proceedings. The gift deed was undoubtedly a voluntary transaction. The question that falls for consideration is whether it was ex....

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....t is that, although at the time when the deed of gift was executed there were no creditors, the second respondent must have intended to defeat his future creditors. It is now well-settled that, for the purpose of avoiding a transfer by a debtor under section 53 of the Transfer of Property Act, it is not necessary that the transferor should have been actually indebted at the time he makes the transfer. A transfer intended to cheat future creditors would be equally voidable at their instance. For example, if a man were to settle all his properties on others, with a view to entering a hazardous business, it can easily be assumed that his intention was to defeat his creditors in the business to be started by him ; such a transfer could be avoided by his creditors. The law on this subject is stated in Halsbury's Laws of England (third edition), volume 17, at page 660, thus : "With the above exceptions, all creditors who have been prejudiced by the alienation made with intent to defraud them, whether their debts were owing at the date it was made or were incurred subsequently, may avoid the alienation and share in the distribution of the property comprised therein. Although subsequ....

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....n or in anticipation of the transferor embarking upon a commercial venture or on the eve of his going into trade, the intent to defeat or delay future creditors will be presumed. But in other circumstances the transaction will be presumed to be bona fide and it will lie on the future creditors to prove that the transfer was made with an intent to defeat or delay them. In Ex parte Mercer : In re Wise, Cave J. (as he then was) observed at page 293 : " In most of the cases which have been cited the settlor was a trader, and undoubtedly when a trader makes a settlement, more especially if he does so when he is just about to commence a course of trade which may turn out to be disastrous, it is difficult to come to any other conclusion than that he contemplates the possibility of his trade being unfortunate, and wishes to put his property out of the reach of his creditors." We have, therefore, to find whether in executing the gift deed, exhibit A-9, the second respondent had any express intent to defeat his creditors either because he could not pay his existing debts or he wanted to defraud the future creditors. That he had no debts at the time when he executed the gift deed, is....