BHERUMAL HOTCHAND Vs. P V GANDHI

JUDGEMENT

(1.) THE appellant herein is a guarantor and transferee of the stock-in-trade and business of the insolvent Messrs. Gitanjali a firm of partnership. The firm was dealing in textiles and it ran into debts. It had an overdraft account with the bank of India. The eventual balance found due to the Bank from the insolvent as on 7-8-1971, was found to be Rs. 1 Lakh. The firm also had other debts, its total liabilities approximately amounting to Rs. 3,58,015. On 7-8-1971, the insolvent transferred its entire assets consisting of the stock-in-trade and the business in textiles to the appellant for a consideration of Rupees 1, 12,000. Out of this consideration, the appellant retained with himself a sum of Rs. 1 lakh for payment to the Bank of India and the balance of Rs. 12,000 he paid to the firm, which the Managing Director of the firm utilised for his own personal purposes. One P. V. Gandhi, one of the respondents before us filed a petition on 16-8-1971, for adjudicating the firm as insolvent under S. 9 (b) and (d ). Actually it was adjudicated as an insolvent on 1-12-1971, but this was in effect done under Section 9 (c), the court holding that the transfer was a fraudulent preference and should be deemed under Sec. 56 to be fraudulent and void as against the Official Assignee.

(2.) THE only question before us is whether the transfer in the circumstances mentioned by us, could be regarded as fraudulent and as one his by Sec. 56. It seems to us that there could be no doubt that the transfer is so hit.

(3.) IN Lakshmana Chettiar v. Jayarama Chettiar, which was concerned with Sec. 53 of the Transfer of Property Act, this court pointed out that where a debtor has several creditors and some property and if he transfers the property to one of the creditors without any furthe circumstances appearing, that might be a preference, but it could not be said to be a fraudulent preference; normally it is not improper for a debtor to prefer his creditor among the many in order to discharge his debt by transfer of property; in order to make a transfer of property; in order to make a transfer a fraudulent one, there should be something more than mere preference and the facts must establish that the preference is a fraudulent one.