PALANTAPPA MUDALI Vs. OFFICIAL RECEIVER OF TRICHINOPOLY

JUDGEMENT

(1.) In connection with the insolvency of one Chidambara Mudali, the Official Receiver of Trichinopoly applied to the District Munsif of Namakkal under Section 36 of the Provincial Insolvency Act to have two sale-deeds executed by the insolvent and others annulled. The District Munsif, however, refused to annul the sale-deeds holding that they had been effected bona fide and for valuable consideration. The sale-deeds were executed by the insolvent, his father and grandfather and covered the whole of the family property, one deed (Exhibit A) relating to the lands and the other (Exhibit B) to the family house.

(2.) In appeal the District Judge, while finding that the consideration for the sales recited in the deeds (viz., Rs. 2,500 in Exhibit A and Rs. 700 in Exhibit B) was adequate, held that it had not been proved that more than Rs. 1,736 had actually been paid in the former case and Rs. 94 in the latter. On a consideration of certain statements made by the insolvent himself as well as on certain other facts found, namely, that the insolvent and the vendees were nearly related, that the insolvent was bankrupt at the time of sale and that the vendors were permitted to retain possession of the family house, the District Judge concluded that the sales were effected to defraud creditors and annulled them. This petition is brought under Section 46 (1), proviso, of the Provincial Insolvency Act to revise the District Judge s order. The vendees are the petitioners and they contend that the District Judge has erred in law in failing to consider and decide, with reference to Section 36 of the Provincial Insolvency Act, the question whether the vendees under Exhibits A and B were purchasers for valuable consideration and in good faith and, secondly, because he annulled the sales as regards the interests of the father and grandfather of the insolvent, though these persons had not been adjudicated insolvent and were not before the Court.

(3.) As regards the first point, the case of Gopal v. Bank of Madras 16 M. 397 : 3 M.L.J. 197 is cited in support of the contention that the mere fraudulent intent of the vendor cannot avoid the sales if the purchasers were free from fraud. The construction sought to be put upon the finding of the District Judge is that he found fraud only on the part of the vendors. I do not think that that is the correct construction of the finding. It seems to me that, although the District Judge has not found in so many words that the purchasers under Exhibits A and B were not purchasers in good faith, that is in fact the plain meaning of his conclusion. His finding is, in effect, that the vendors and vendees being closely related effected the sales in order to defraud creditors, and it necessarily follows from that finding that the vendees no less than the vendors were actuated by fraud.