MAHOMED SIDDIQUE YUSUF Vs. OFFICIAL ASSIGNEE

JUDGEMENT

(1.) THIS is a consolidated appeal from two orders of the High Court at Calcutta, one dismissing an appeal from the Judge in Insolvency and the other refusing to extend the time for appealing against an adjudication order made against one Ali Moharaed Hashim, who will hereafter be called "the insolvent" As a result of their Lordships' decision in this case the facts may have to be considered afresh in the Indian Courts, and it is desirable therefore to state the details as summarily as possible so far as they are relevant at the present time. In 1938 the insolvent had a claim for damages against a firm with whom he had dealings in shares, and by a written agreement of March 30, 1938, between the appellant and the insolvent the former agreed to advance money for the costs of the contemplated suit and to assist in the conduct of it, for which services he was to receive half the monies recovered after deducting the advances. On April 1, 1938, the suit was instituted and on January 19, 1939, was decreed for Rs. 6,750 and interest. On January 20, 1939, by indenture of assignment, the insolvent assigned to the appellant the said decree in consideration inter alia of his discharge of all liabilities under the agreement of March 30, 1938, and Rs. 1,000 then paid to him in cash. THIS is the assignment which is the subject of the first order of the appellate Court above referred to. Meantime, on November 8, 1938, one Hamid Haji Umer, hereinafter called the petitioning creditor, had filed a suit against the insolvent for money due from the insolvent in respect of share transactions in which the plaintiff had acted as his broker. On April 5, 1939, the suit was decreed for Rs. 15,789-10-0. On April 19, 1939, the petitioning creditor filed a petition in the High Court for, the adjudication of the insolvent as an insolvent. The petition alleged several acts of insolvency. One of these was that the insolvent on January 20, 1939, executed the deed of assignment to the present appellant of the decree of January 19, 1939, with the intention of preferring the present appellant over other creditors. On April 25, 1939, the petitioning creditor obtained ex parte the appointment of the official assignee as interim receiver of the decree of January 19, 1939 ; correspondence with the appellant followed in which on April 29 he was supplied with a copy of the petition for adjudication. In May the appellant instituted proceedings in execution of the decree, and an order was made that the judgment-debtor pay the money into Court, which he has done, and that it be not withdrawn except with the leave of the Insolvency Court. On June 13, 1939, an adjudication order was made against the insolvent. No one appeared except the petitioning creditor, and the order recited that the insolvent had committed each of the acts of insolvency alleged in the petition. In August the appellant applied in the Insolvency Court for leave to take out the decrial money then in Court. Leave was given subject to leave being obtained in the suit. The appellant then applied for similar leave in the suit. THIS application was opposed by the official assignee, and on August 31, 1939, an order was made to which their Lordships attach importance. It was that the appellant was to be entitled to withdraw the amount on furnishing security. If the official assignee made any application on the first insolvency day after the reopening of the Court, then the application was to abide the result thereof. If no application were made, then the order was to be made as asked for. In pursuance of this order the official assignee on November 23, 1939, gave notice of motion in the Insolvency Court for a declaration that the indenture of assignment dated January 20, 1939, be declared void as against the official assignee and that the transfer be set aside. THIS is the motion which is the subject-matter of the present proceedings.

(2.) JUDGMENT on the motion was not given until July 25, 1940. The learned Judge dealt with two points taken by the official assignee. In the first place, it was said that the transfer having been found to be an act of insolvency in the order of adjudication could no longer be alleged by the transferee not to be void on that ground. In the second place, it was said that apart from the effect of the adjudication order the evidence showed that in fact it was a fraudulent preference. The learned Judge inclined to accept the first contention, which was based on the well known case of Ex parte Lemoyd : In re Foulds (1879) 10 Ch. D. 3, but appreciating that there was authority to the contrary in India in the decision of the Madras High Court in Official Assignee of Madras v. 0.R.M.0. Rule Section Firm (1939) I.L.R. 50 Mad. 541, would not express a final opinion on the point. On the facts, however, in evidence before him he found the intent to prefer proved. In the appellate Court the case took a different turn. Both Judges expressed some doubt whether the intent to prefer was in fact proved ; but they were both of opinion (following Ex parte Lemoyd) that the order of adjudication was conclusive and could not be disputed. Their Lordships entertain no doubt that this decision was correct. Ex parte Learoyd is well established in England : it was decided on the language of the Bankruptcy Act, 1869 : both the relevant sections have been repeated in the Acts of 1883 and 1914, and the decision has taken its place as a leading case on this part of the law. The provisions of the Presidency-towns Insolvency Act, 1909, are also in similar terms, and their Lordships feel no doubt that the principles of the English decision are as valid in India as in England. No doubt it is anomalous that a decision affecting the right of a third party should be conclusively determined against him in his absence, and even without notice to him, but the words of the section and the importance of maintaining the status of the debtor as determined by an order of adjudication, and the necessity of securing the stability of the administration of the debtor's estate once his status has been fixed, have been justly held to outweigh the consideration of hardship to the private citizen. Their Lordships are of opinion, therefore, that the decision of the Madras High Court in Official Assignee of Madras v. 0. Rule M. 0. Rule Section Firm was incorrect and must be taken to be overruled.