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Bombay High Court
Govind Dattu Lonari vs Yesuji Khandoji on 15 August, 1907
Equivalent citations: (1908) 10 BOMLR 492
Author: Chandavarkar
Bench: Chandavarkar, Knight


Chandavarkar, J.

1. The judgment of the District Judge appealed from is not clear as to the facts found. The learned District Judge says at the outset that he quite agrees with the findings of the lower Court on the questions of fact. We turn to these findings and it appears from the judgment of the Subordinate Judge, Mr. Dikshit, that his finding on the question of facts in the case was that the sale relied upon by the plaintiff from the defendants 1 and 3 was a colourable transaction not intended to operate as a real sale. That was a distinct finding of fact. Whether it was correct or not, it is not for us, sitting in second appeal, to say. But the real controversy arising out of the pleadings in the case was centered in the question whether the sale was a real transaction or whether it was a sham transaction never intended by the parties to have any effect but intended only to protect the property from the creditors of the defendant. Among other circumstances the Subordinate Judge relied upon one circumstance, namely, that the consideration for the sale was grossly inadequate, and had the District Judge found that the sale was a sham transaction, the finding would have been quite clear and it would have been, binding upon us in second appeal. But having observed that he quite agreed with the Subordinate Judge on the questions of fact the District Judge goes on to remark as follows:’-” In this case the transaction that the persons concerned effected was a sale and nothing else. Consideration passed and the conveyance was not a mere fraudulent conveyance on paper to defeat creditors. The creditors could not have set the transaction aside.” If this language means anything it means that there was consideration for the sale and that therefore it was not a sham transaction. It is difficult to reconcile this finding with the previous portion of the judgment in which the District Judge says he agrees with the Subordinate Judge’s finding of fact, which was that the sale was colourable. This inconsistency in his judgment makes it impossible for us to accept the District Judge’s finding as conclusive in law.

2. Then the District Judge has fallen into another error. He seems to have thought that the Subordinate Judge had he’d that the real intention of the parties in regard to the sale-deed was that it should be regarded as a mortgage transaction, but there is nothing in the Subordinate Judge’s judgment to show that that was his view. In fact such a view would have been unsustainable having regard to the pleadings in the case. Therefore the whole question was a very simple one-whether the sale on the strength of which the plaintiff brought this suit to recover possession was a real transaction intended by the parties to operate as such? In other words whether the defendants by means of this sale intended to part with their ownership and the plaintiffs intended by means of it to become the owners of it, or whether it was a colourable transaction, the parties having intended that the defendants should in spite of the sale-deed continue to be the owners of the property, but that the plaintiffs should appear as ostensible owners merely for the purpose of shielding the property from the defendants’ creditors.

3. Upon these questions there must be a distinct finding of fact and in the determination of that question the inadequacy of the consideration must be a piece of evidence to be appreciated with the rest of the evidence in the case. We, therefore, send down the following issues to be determined by the District Judge with reference to the foregoing observations :-

1. Whether the sale in dispute is a real or a sham transaction?

2. If the finding of the first issue is that the transaction was a sham, intended to defraud creditors or others, whether the fraud has been carried out?

4. We have allowed this second issue to be raised at the instance of the plaintiff’s pleader before us but whether it arises or not as a matter of law is a question which will be determined after the findings are returned to this Court.

5. Findings to be returned within two months.

6. We may point out to the District Judge that all the difficulties in this second appeal have arisen from his judgment because he has not raised the points for determination as required by the provisions of the Civil Procedure Code. We wish to impress upon the lower Courts of appeal the necessity of always raising such points in every appeal before it is argued because they narrow the points in controversy and leave little or no room for complaint in second appeals.

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