KASI IYER Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) This is an appeal by respondents 2 and 3 in Original Petition No. 153-A of 1923 in Insolvency Petition No. 13 of 1922 before the District Judge of West Tanjore, against an order passed under Section 54, Provincial Insolvency Act, in the following circumstances: At the instance of a creditor who put in an application on 14 December 1921 respondent 1 in the lower Court, one Sivaswami Iyer, was adjudicated an in- solvent in 1923. The insolvent was carrying on business in rice, grains and pulses mainly at Madras, Negapatam, and Rangoon. In the course of his business he used to take" moneys from time to time from the appellants, who are bankers, carrying on a large business at Kallidaikurichi. They had extensive business at Madras, Tinnevelly, Tuticorin and other places also. The insolvent was introduced to them by one Ramaswami Ayyar who knew both the parties very well. In the course of their dealings some hundies to the extent of Rs. 7,000 were drawn by the insolvent in favour of the appellant but these were dishonoured. The insolvent then executed on 20 September 1921 a registered security bond, Ex. D, for Rs. 10,000 to cover the hundi amount and other moneys due from him to them. The. Official Receiver filed an application to; annul this security bond under Section 54,. Act 5 of 1920 on the ground that it operated as a fraudulent preference. It was mentioned that the insolvent executed a number of documents with a view to prefer the alienees who are either his good friends or relations, without any pressure on their part, in secrecy and without their knowledge : see para. 4 of the Official Receiver's affidavit, and it was alleged that the security bond in question was one of such alienations. These allegations were denied and the petition was strongly resisted by the appellants. On the evidence the learned Judge found that the security bond was fully supported by consideration and that the appellants took it in good faith and without any knowledge that it operated as a fraudulent preference but he held that, when the insolvent executed this document in their favour, he intended to prefer them fraudulently to-the other creditors and therefore he set it aside under Section 54, Provincial Insolvency Act. This appeal has been filed by respondents 2 and 3 against this order of the learned Judge.

(2.) The evidence in the case consists mainly of that given by the insolvent, P.W. 2, Subba Ayyar, R.W. 1; the agent of the appellants; and Ramasamy Ayyar, R.W. 2, the common friend of the parties. The finding of the learned Judge that at the time when Ex, D was executed the appellants did not know of the highly involved circumstances of the insolvent, that they took the document in good faith and that it was fully supported by consideration has not been seriously challenged before us. There is abundant evidence to support the conclusion of the learned Judge on these points. It is not necessary to refer to the evidence at any great length but we would only add to the observations of the lower Court that it was not suggested to Subba Ayyar, the agent, when he was examined, that he knew that Sivasami Ayyar was an insolvent and that both he and Ramaswami Iyer say that they found stock in the insolvent's shop at Madras. As noticed by the learned Judge the appellants advanced some moneys to the insolvent even after June 1921 when he was not in a position to meet the demands of various creditors and the insolvent also appears to have paid moneys afterwards to them. The real question for consideration is whether the document in question was executed by the insolvent "with a view of giving the appellants a preference over the other creditors" within the meaning of Section 54, Provincial Insolvency Act.

(3.) The law is well settled that in cases of this kind what the Court has to determine is: was the dominant motive actuating the debtor in making the transfer a desire to prefer the particular creditor or was it of a different character.