SUSARMOY SEN Vs. BIBHUTI BHUSAN JANA

JUDGEMENT

(1.) This appeal is directed against an order of the Additional District Judge of Howrah dated 6 October 1931 passed under Section 53, Provincial Insolvency Act (1930) by which he annulled a certain transfer in favour of the appellants in the present case. The learned Additional District Judge has come to the conclusion that so far as the passing of the consideration is concerned it has been established in this case. He has further found that deeds were executed for the purpose of paying certain previous mortgages executed so far back as the year 1922 which transactions the learned Judge found to be genuine and for consideration. The reason given by the learned Judge for annulling the transfer is that he is satisfied on the circumstances of this case that the transfer was not made in good faith and the only question which has been debated before us in this appeal is as to whether the circumstances which have been established in this case lead to the necessary inference that the transaction, entered into by the appellants was bad for want of good faith. It is necessary to premise at the outset that the burden of proving the want of good faith of the transaction and the passing of consideration is on the receiver. The view which prevailed in India before, namely that the burden of proving the consideration and good faith lay on the purchaser of the encumbrances can no longer be regarded as a sound view of law in the face of the two decisions of their Lordships of the Privy Council to which reference has been made in the course of the argument. The first of these decisions was given in an appeal from the Straits Settlements. That was in the case of Official Assignee of the Estate of Cheah Soo Tuan V/s. Khoo Saw Cheow AIR 1930 PC 266 where their Lordships were construing the provisions of Bankruptcy Ordinance 50 of the Straits Settlements the provisions of which are somewhat analogous to the provisions of Section 53, Provincial Insolvency Act. The second case is the case of Official Receiver V/s. P.L.K.M.R.M. Chettyar Firm . It was laid down by their Lordships in this case that where the receiver is seeking to set aside a mortgage under the provisions of Section 5b, Provincial Insolvency Act (1920) the onus is upon him to prove that it was not made in good faith and for valuable consideration: vide Official Receiver V/s. P.L.K.M.R.M. Chettyar Firm . The learned Additional District Judge has kept these decisions in view and he has rightly cast the onus on the Official Receiver of showing that the transaction was not made in good faith and for valuable consideration.

(2.) The only question which we have to consider is whether the receiver who is the respondent in the present case has discharged that burden. It becomes necessary therefore to state the circumstances which have led to the transfer which is now the subject-matter of controversy. It appears that one Kalidas Mondal and his mother executed a mortgage of a half share of their dwelling house on 16 January 1922 in favour of the present appellants. The appellants had advanced a sum of Rs. 2,000 which was secured by the said mortgage. A portion of the consideration money from this sum was applied by Kalidas to the liquidation of the debts of his creditors. This transaction has been proved and has been marked as Ex. B in the case. On 11 July 1922 Kalidss's mother executed a further mortgage in favour of the appellants for a sum of Rs. 2,000. This document is marked as Ex. R and the evidence is that Kalidas paid a sum of Rs. 1,800 out of the consideration of Rs. 2,000 in favour of one Provabati Devi who was an earlier mortgagee and the release executed by the said Provabati Devi has been proved in this case and has been marked as Ex. U. On 17 November 1922 Kalidas and his mother executed a further mortgage in respect of this dwelling house for another sum of Rs. 2,000 which was paid before the Registrar at the time of registration in Cossipore Registration Office. Then it appears that be borrowed from the appellants from time to time some money on hatchitas. These hatchita debts amounted to about; Rs. 800. The learned Additional District Judge has found all these loans to be genuine. On 20 January 1926 Kalidas and his mother executed a conveyance of the mortgaged property for a consideration of Rs. 11,350 the consideration being made up of a sum of Rs. 10,473 due on the three mortgages which have already been mentioned and the balance in respect of the sum due on the hatchitas. On 1 February 1926 shortly after the execution of this conveyance, proceedings in insolvency were commenced at the instance of the debtor Kalidas. In the application for insolvency small debts due to some Kabulis amounting to Rs. 800 odd were mentioned as due from the applicant. The adjudication order was made on 8 March 1926.

(3.) After the adjudication order it appears that the receiver in insolvency took proceedings for annulment of the deed of sale and proceeded under the provisions of Section 54, Insolvency Act. On 14 May 1926 the learned Judge took the view that as it was a fraudulent preference in favour of the appellants who were two of the several creditors the transfer should be annulled. Against that decision the present appellants preferred an appeal to this Court and my learned brothers B.B. Ghose and N.K. Bose, JJ., said that the learned Additional District Judge entirely misconceived the case and set aside his order which was made under the provisions of Section 54 of the Act; and suggested that the proper course to take in the matter was that he should proceed under Section 58 of the Act. That was accordingly done on remand. On remand the appellants had adduced evidence in the case and both the appellants stated in their evidence that they had no knowledge of the intention of Kalidas to make an application to be adjudged an insolvent so soon after the transfer in their favour by the deed of sale. Reference has been made to a portion of this evidence by Mr. <JGN>Mitter</JGN> who appears for the appellants. Both of them have distinctly stated, as I have already indicated, that although they were, on intimate terms with Kalidas they had no apprehension in their minds that the said Kalidas intended to make an application to be adjudicated an insolvent. They have been subjected to cross examination on behalf of the receiver and I do not see that they have been in any way shaken in the cross-examination in so far as their date of knowledge is concerned. It has been argued on behalf of the respondent that they were not telling the truth, that they came to know of the order of adjudication four months after the date of the kobala in their favour. As a matter of fact they came to know of it on 8 March 1926 when the order of adjudication was made. It is no doubt true that there was a slight discrepancy and we cannot on the basis of that discrepancy reject the testimony of the appellants. On one occasion when they said that they had no knowledge of the insolvency their testimony was accepted.