R D SETHNA Vs. KALLIANJI SANGJIBHAI

JUDGEMENT

(1.) This is a suit by the Official Assignee to recover from the defendant No. i the sum of Rs. 8300 paid to him on the 27th of March 1908 by Ramji Monsey on behalf of the insolvent firm of Laxman Rekhuji on the ground of fraudulentpreference.

(2.) The material facts, none of which I think are disputed, are that on the 27th of March 1908 Rainji Monsey, the manager of the firm of Laxman Rekhuji, drew certain Hindies on the Mandvi branch of the defendant No. 1 s firm, sold them in the Bazaar and realised Rs. 7200. Adding to this sum of Rs. 1100 from the small cash balance he then had, Ramji Monsey paid Rs. 8300 to the defendant No. i sometime in the afternoon of the 27th of March. By the evening of the 28th of March the firm was known generally in the Bazaar to be, if not actually insolvent, on the very brink of insolvency. On the 2pth all the creditors appear to have come down upon the firm and as they could not be satisfied it may be said that the firm stopped payment on that day. It was adjudicated at the instance of Virji on the 31st of March 1908. To understand the reason for the alleged fraudulent preference it is necessary to say that there were three Hundies, drawn by the insolvent firm upon itself, endorsed by the defendant No. 1, discounted at the Bank and paid over to the insolvent firm, which were shortly to mature. The first of these Hundies actually matured on the 30th of March 1908, the due dates of the other two being the 16th and 26th of May. It is evident that if the insolvent firm were unable to pay these Hundies, the aggragate amount of which was Rs. 7500, the defendant No. i would have been called upon to do so. The defendant No. 1 is the nephew of Ramji Monsey, the manager of the insolvent firm. It is the allegation of the plaintiff that the insolvent firm being fully aware that it was then in insolvent circumstances deliberately paid over the sum of , Rs. 8,300 to the defendant in order to fully indemnify the defendant in respect of these three Hundies, principal, interest and brokerage. And it is suggested (though this is not in law necessary for the plaintiff s success) that the proceedings of the 27th of March were collusive between the insolvent and defendant No. 1, their common object being to obtain the money from innocent third parties to indemnify the defendant when called upon by the Bank to take up these Hundies. In support of that view it may be mentioned here that the defendant No. 1 telegraphed in the evening of the 28th of March at about 10-30 to his Mandvi firm not to accept any Hundies drawn upon it by the insolvent firm. Thus if this suggestion be true, the defendant No. i and his uncle Ramji Monsey colluded together to defraud the purchasers of the three Handles drawn on the Mandvi branch of the defendant 1 s firm, and no sooner had they by means of that fraud obtained the moneys then the defendant No. 1 promptly secured himself against any loss by telegraphing to Mandvi to stop acceptance. The defendant No. 1 s case is that he was totally unaware of the precarious condition of Laxman Rekhuji when he received the Rs. 8300 in the afternoon of the 27th of March. He says that there had been current dealings for about two years between himself and the .insolvent firm and that this payment was made in the ordinary course of those dealings by the insolvent firm and placed to the credit of that firm s account. When I come to deal with and dispose of the principal questions of fact, I shall have something to say upon the rival accounts, I have just barely outlined, given by the plaintiff and defendant No. 1, of the payment of this sum of money.

(3.) These being the material facts, although others will be required to be introduced when I come to discuss the evidence, the defendant first raises one or two technical legal objections which may, I think, be conveniently disposed of here.