BUCHAYYAGARI RANGA REDDY Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) The question to decide is whether the sale-deed impeached amounts to a fraudulent preference under Section 54 of the Provincial Insolvency Act. The material dates are these. The second respondent was adjudicated insolvent on 30 November, 1931, on a creditor's petition dated 8 August, 1931. The insolvent had executed the sale-deed in question on the 27 July, 1931, in favour of his nephew and son-in-law, the first respondent. On 9 July, 1932, the application, out of which this civil revision petition arises, was made by the Official Receiver for the setting aside of the sale-deed. The learned District Judge, reversing the decision of the trial Court, has held that the conveyance amounts to a# fraudulent preference. The first respondent, the transferee, questions the correctness of the District Judge's order.

(2.) There is practically no dispute about the facts which may be shortly stated. In 1922, the second respondent was appointed guardian of the first under the Guardians and Wards Act. As the record shows, bonds of the value of about Rs. 7,200 belonging to the ward were taken" possession of by the guardian. On 22nd February, 1931, the first respondent, who had by then attained majority, applied to the Court for directions against his quondam guardian, complaining that he had misappropriated the ward's funds and that proper accounts had not been rendered. The second respondent in his counter-affidavit, dated 6 July, admitted the breach of trust and, after putting forward various excuses, offered to convey his immovable property to get released from his obligation. The matter was apparently adjourned to enable the second respon dent to carry out his promise and on 27 July, as already stated, the sale- deed in question came into existence. The sale purports to be for Rs. 6,000, the second respondent having been given credit for some amounts which he alleged to have expended on his ward's behalf. The application was finally disposed of on 8 August, when the Judge after recording the settlement dismissed the petition. On the same day, as already noted, the petition to adjudicate the second respondent insolvent was filed.

(3.) On these facts the question arises, does the conveyance amount to a fraudulent preference under Section 54 of the Provincial Insolvency Act? Both the Courts concur in finding that there was a true pre-existing debt as alleged by the transferee. They concurrently find further that the property conveyed was not worth more than Rs. 6,000, the consideration mentioned in the deed. That a petition imputing breach of trust to the second respondent was then pending, is common ground. Beyond these admitted facts, the first respondent swears that some ill-feeling had arisen between him and his former guardian a circumstance to which the District Judge does not advert. True, when he moved the Court, the first respondent was aware, as admitted by himself in his affidavit, that the second respondent was "on the brink of insolvency". These being the facts, is the Judge's decision right? The test in such cases is, what is the dominant or operative motive of the debtor in making the transfer. Is it a reasonable inference from the facts above mentioned, that the dominant view which influenced the second respondent was to prefer a particular creditor, or, is it more reasonable to hold that he acted with a view to protect himself from exposure or from any sort of proceedings? The first respondent was pressed to say in cross-examination: As I was his son-in-law, the second respondent wanted to pay me first.