ANGAPPA CHETTY Vs. GNANJAPPA ROW

JUDGEMENT

(1.) This is an appeal by creditors against an. order made under Section 351 of the Code of Civil Procedure, declaring the respondents insolvents and appointing a Receiver. Anything like a satisfactory administration of the insolvency provisions of the Code is always a matter of difficulty, and in this particular case the difficulty is increased by the facts being somewhat complicated and the evidence being incomplete. For the purposes of the questions raised in this appeal, so far as they can be gathered from the evidence before this Court, the facts may be briefly stated as follows: The respondents are planters and were the owners of two estates known as the Tudor Valley Estate and the Bakely Coffee Estate. On July 20th, 1887 the respondents mortgaged the Tudor Valley Estate to Mr. Gore Langton for Rs. 25,000 and a further advance of Rs. 10,000 was afterwards made. On March 23rd, 1891, the respondents agreed to sell the Tudor Valley Estate to Rangiah Goundan for Rs. 77,500 of which Rs. 25,000 was to be appropriated in discharge of Mr. Gore Langton's mortgage. This agreement resulted in protracted and costly litigation between Rangiah Goundan and the respondents. Rangiah Goundan took possession of the Tudor Valley Estate and both sides filed suits for possession whilst Rangiah Goundan also filed a suit for specific performance of the agreement to sell. These suits ultimately resulted in favour of the respondents. On July 19th, 1892, Rangiah Goundan took a transfer of Mr. Gore Langton's mortgage and in 1896 he brought a suit on the mortgage against the respondents (O.S. No. 74 of 1896). In the same year the respondents brought a suit (O.S. No. 82 of 1896). against Rangiah Goundan for mesne profits for the five years during which the latter had been in unlawful possession of the estate. On April 15th, 1896, the respondents mortgaged the Tudor Valley Estate and the Bakely Estates to Mr. Gore Langton for ?2,000 and on October 29th, 1900, Mr. Gore Langton assigned his mortgage to Messrs. Arbuthnot and Latham. On August 27th, 1901, the respondents executed a second mortgage on the two estates to Messrs. Stanes & Co., to secure an advance of Rs. 15,000 odd and further advances not exceeding Rs. 20,000.

(2.) The suits of 1896 were carried to the High Court with the result that Rangiah Goundan obtained a decree against the respondents for Rs. 78,000 and the respondents obtained a decree for Rs. 1,25,000 against him. Both parties obtained leave to appeal to the Privy Council. At this stage a compromise was agreed to Rangiah Goundau paid Rs. 30,000 into the High Court and on March 15th, 1905, leave was given to both parties to withdraw their appeals to the Privy Council. On July 7th, 1903, the respondents assigned to Mr. Gore Laugton by way of further security but without any fresh advance their claim in their pending suit for mesne profits. On July 9th, 1903, the respondents assigned to Messrs. Stanes & Co., by way of further I security and subject to the assignment to Mr. Gore Langton the same claim.

(3.) In 1899 one Angappa Chetty brought a suit against the respondents (O.S. No. 31 of 1899) and obtained a decree for "Rs. 7,000 odd. In November 1904, in execution of this decree and prior to the compromise, he attached the decree which had been obtained by the respondents in their suit for mesne profits. He subsequently attached the Rs. 30,000 in the hands of the Registrar of this Court. The Rs. 30,000 was transferred from this Court to the Coimbatore District Court. The points raised in support of the appeal were (1) that the compromise of March 1905 was in fraud of the rights of Augappa Chetty as an attaching creditor; (2) that the compromise operated as an unfair preference to Rangiah Goundan and also to Mr. Gore Langton and Messrs. Stanes & Co., and was given at a time when the respondents knew they could not pay their debts in full; (3) that the two assignments of 1903 were unfair preferences to Mr. Gore Langton and Messrs. Stanes & Co., respectively, and were given at times when the respondents knew they could not pay their debts in full; (4) that the respondents recklessly contracted debts when they knew they could not pay their debts in full; (5) that the 1st respondent had been guilty of an act of bad faith in not including in his schedule the monthly allowance of Rs. 65 which he had been receiving from Messrs. Staues & Co.