DIST OFFICIAL RECEIVER Vs. SVNALLAPERUMAL PILLAI

JUDGEMENT

(1.) This appeal is by the Official Receiver of Tinnevelly against the order of the District Judge in the matter of a motion of the Official Receiver under Section 54, Pro Ins. Act. The Official Receiver by a motion in I P No. 16 of 1921 sought to have declared fraudulent and void against him under Section 54 three mortgages by the insolvents in favour of the three respondents to this appeal. The District Judge dismissed the petition and the Official Receiver appeals.

(2.) The two insolvents, examined as P.Ws. 1 and 3, were from 1916 to 1920 carrying on an extensive trade, both local and export, in leather and hides in Tuticorin. On 20 April 1921, one of their creditors, whose clerk is examined here as P W. 4 put into the District Court I. P. No. 16 of 1921 praying that the insolvents may be declared insolvent. That petition was resisted by the insolvents, but after inquiry they were declared insolvent on 17 December 1921.

(3.) The three documents of mortgage, attacked by the Official Receiver as fraudulent preferences in favour of particular creditors, were executed, Ex. 2 on 26 January 1921, in favour of respondent 1, Ex. 3 on 31 January 1921 in favour of respondent 2 and Ex. 4 on 23 February L921 in favour of respondent 3. It is not disputed that by these three mortgages all the immovable property of the insolvents was mortgaged. The principles of law applicable to matters of this kind are clear enough. A mere transfer of property or payment made to one creditor rather than another by an insolvent on the eve of the insolvency while it is no doubt in essence a preference of one creditor over another is not in the eye of law made " with a view of giving that creditor a preference over other creditors," unless the dominant intention of the insolvent in making the preference was to prefer that particular creditor over the rest to give him an undue advantage and thus defraud the other creditors of their lawful rights to share rateably in the assets. What the dominant intention was is always regarded as a pure question of fact, and the Court has therefore to decide as a question of fact what was the dominant intention of these insolvents when they made these transfers. The learned trial Judge has decided that in the present case the dominant view of the insolvents was to stave off those creditors, who were bringing most pressure to bear upon them, to tide over a difficult time and save their credit in order that they might still carry on their trade and avoid bankruptcy and that therefore there was no fraudulent preference. The argument before us centred on the point whether these preferences are due to pressure brought to bear on those insolvents by these three creditors.