RAMANANDA PAUL Vs. PANKAJ KUMAR GHOSH, RECEIVER

JUDGEMENT

(1.) This is an appeal from an order of the District Judge of Dacca made on 27 May 1935, wherein he declared a certain mortgage deed executed by the insolvent to be void as against the receiver, first, as a fraudulent or undue preference under Section 54, Provincial Insolvency Act and, secondly, under the provisions of Section 53 of the same Act. The insolvent, Brindaban Chandra Das Basak, resided and carried on business as a cloth dealer in Dacca. In addition to having his business, he had a certain quantity of private property in the form of land and houses. Prior to 1931, his affairs seemed to have become somewhat difficult and he was undoubtedly short of money. On 23 February 1931, he executed a deed whereby he purported to transfer some of his property to debutter purposes. On 11 March 1931, he executed the mortgage deed which is now in question. This deed was registered on 23rd March 1931. On 16 June 1931, some creditors filed a petition in insolvency against Brindaban and on 11 January 1932 he was adjudicated insolvent. On 13 February 1933, the receiver made an application to have both the debutter deed and the mortgage deed set aside. The learned District Judge set aside both the deeds. We heard the appeal relating to the debutter deed yesterday and we upheld his decision with regard to that. The circumstances relating to the execution of the mortgage deed are these: On 11 March 1931, the insolvent was undoubtedly in financial difficulties. Many decrees had been obtained against him and some of his property was attached. In addition to the decree-holders there were other creditors for a sum somewhere about Rs. 70,000. Amongst those creditors was the opposite party in this matter, Ramanarida Pal. Ramananda Pal was a creditor for a matter of Rs. 9000. He lived in Dacca and was well known to the insolvent. Several witnesses have stated that they were friendly. On 14 March, the mortgage deed in question was drawn up and it conveyed property worth about Rs. 60,000 to Ramananda Pal by way of mortgage. "When the document was executed, according to the evidence, the mortgagee, Ramananda Pal, produced a sum of Rs. 33,000. He paid Rs. 13,000 odd to Brindaban and retained some rupees 19,000 odd. Of the Rs. 19,000, Rs. 9000 odd was retained by Ramananda against the debt that Brindaban owed. The other Rs. 10,000 was paid to various creditors who had obtained judgment against Brindaban or had attachment upon his property. Of the Rs. 13,400 paid to Brindaban he appears to have paid it all with the exception of a small sum well under Rs. 1000 to various creditors. However, there were still creditors for a sum of about Rs. 50,000 in value who received no payment at all. It is those creditors acting through the receiver who have challenged this transaction. It is said that the transaction was one in which the chief, if not the entire remaining asset of the insolvent, was transferred to Ramananda and so put out of the reach of the dissenting creditors and in return Ramananda was paid-a favoured batch of creditors also-out of the money that Ramananda lent under the mortgage. It is said that this amounts to an undue preference under Section 54, Provincial Insolvency Act and that it is also bad under Section 53 as being a transfer of property not made in good faith and for valuable consideration.

(2.) I will deal with the question of undue preference first. Section 54, provides that every transfer of property and every payment made by any person unable to pay his debts as they become due in favour of any creditor with a view of giving that creditor a preference over the other creditors shall, if such person is adjudged insolvent on a. petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court. It was contended on behalf of Ramananda that Section 54 did not apply because the mortgage-deed was executed on 11 March, and the creditors petition was presented on 16 June, more than three months afterwards. The receiver replied to that argument that the mortgage deed was registered on 23 March, within three months of the presentation of the petition and that time begins to run from the registration of the deed. In support of that contention he relied upon two cases, namely the case in Muthiah Chettiar v. Official Receiver, Tinnevelly (1933) 20 AIR Mad 185 and the case in U Ba Sein V/s. Maung San (1934) 21 AIR Bang 216. I have given careful consideration to those two decisions. From the point of view of the operation of the bankruptcy law, there is something to be said for them. But in my view the legal position is concluded by Section 47, Registration Act of 1908 which provides: A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.

(3.) Having regard to Section 47 of the Registration Act, I can only hold that the mortgage deed operated from 11 March 1931, and not from 23 March. In my opinion, therefore, time began to run, as far as insolvency proceedings under the Act were concerned, from 11th March. In consequence, the petition brought in these proceedings was not brought within three months of the transfer of the property concerned and thus Section 54 has no application. The learned District Judge held on the authority of the two cases I have mentioned that Section 54 did operate, that there was an undue preference and that therefore the deed was void under Section 54. In my opinion, the learned Judge was in error in so holding. I now turn to the second question, namely was this transaction within the mischief of Section 53 of the Act. Section 53 of the Provincial Insolvency Act provides: Any transfer of property not being a transfer made before or in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent on a petition presented within two years after the date of the transfer, be voidable as against the receiver and may be annulled by the Court.