NALAM VISWANATHAM; THE OFFICIAL ASSIGNEE OF MADRAS Vs. OFFICIAL ASSIGNEE OF MADRAS; CHIKKA PADMAVATHI AMMAL

JUDGEMENT

(1.) These three cases have arisen out of the same order passed by Mr. Justice Bake well on a notice of motion taken out by the Official Assignee in the matter of the insolvency of Nalam Venkataratnam, who was adjudicated as an insolvent on the 30th March 1911. The notice of motion was taken out on the 21st April 1911. The prayers of the motion were for a declaration that the insolvent was guilty of fraudulent preferences in drawing 16 hundis for Rs. 21,682 in favour of Nalam Viswanatham Chetty between the 10th and 13th March 1911 and a hundi in favour of Chikka Padmavathi for Rs. 5,000 on the 11th March 1911 and for directing the said Nalam Viswanatham to pay to the Official Assignee Rs. 10,500 realised on foot of 7 of the 16 hundis or in the alternative that he should be directed to pay Rs. 5,500, and Chikka Padamavathi should be directed to pay the remaining Rs. 5,000. Nalam Viswanatham and Chikka Padmavathi were the two respondents in this notice of motion. Padmavathi did not appear to contest the motion before Mr. Justice Bakewell, nor did she appear in the Appeal No. 19 of 1915 preferred by the Official Assignee against Mr, Justice Bakewell s order which omitted to fix her with any liability.

(2.) After full arguments, I think that the following facts are proved by the evidence in the case. Those facts are (a) "The insolvent had a running account with Viswanatham; they were in the habit of accommodating one another by accepting bills and the insolvent used to draw on his mofussil constituents in favour of Viswanatham in order to repay the sums due to the latter." (b) On the 12th January 1911, the insolvent had drawn 8 hundis upon Viswanatham for Rs. 8,000, payable on the 13th and 25th March 1911. Viswanatham accepted these hundis for the accommodation of the insolvent, that is, though he had no monies of the insolvent in his hands, the hundis were discounted at the Bank of Madras. The insolvent was bound in the usual course of business to put Viswanatham in funds before the 13th and 25th March 1911 to meet Viswanatham s liabilities as acceptor to the Bank of Madras. It was partly with this view that the 16 hundis were sent between the 10th and 13th March by the insolvent to Viswanatham, (c) Out of the Rs. 10,500 collected by Viswanatham, he paid Rs. 5,500 into the Bank of Madras so as to discharge himself of his liability to the Rank of Madras as an acceptor of the insolvent s hundis. (d) The insolvent owed Chikka Padmavathi, his daughter, Rs. 5,000. Padmavathi and Nalam Viswanatham were relations. Padmavathi asked Viswanatham (on whom the insolvent drew an at sight hundi for Rs. 5,003 in Padmavathi s favour) to hold the Rs. 5,000 as her banker. Padmavathi herself endorsing the hundi in advance and sending it to Viswanatham. Nalam Viswanatham as soon as he received the hundi from Padmavathi debited himself with the Rs. 5,000 as received from Padmavathi and credited her with the Rs. 5,000. He afterwards on her requisition sent Rs. 4,500 and still had Rs. 500 left with him as her banker when this motion was taken out.

(3.) On these facts, the learned Judge held (1) that the payment of Rs. 5,500 to the Bank of Madras was not a fraudulent preference of Viswanatham. (2) That the hundi drawn on Viswanatham by the insolvent in favour of the insolvent s daughter, who is not shown to have pressed for payment of her debt, was an undue preference. (3) That as Viswanatham had not actually accepted the hundi drawn on him by the insolvent in favour of Chikka Padmavathi, so as to make himself liable thereon to her, that hundi can only be treated as an authority by the insolvent to Viswanatham to pay the Rs. 5,000 to his daughter and that authority having been revoked by the insolvency, Viswanatham s payment of Rs. 4,500 afterwards to Chikka Padmavathi was unauthorised and cannot bind the Official Assignee.