DWARKA PRASAD Vs. DHARAMNATH SAH

JUDGEMENT

(1.) This is an appeal, from the order of the Additional District Judge of Chapra made on 6 September 1938, dismissing a creditor's petition to declare one Dharamnath Sah an insolvent. It appears that Dharamnath Sah was the debtor of Narayan Prasad, the father of the petitioner before us, who is now dead and who filed the petition in the Court below with the result I have stated. The petition in the Court below was opposed by one other creditor who has been described in these proceedings as the transferee. By a deed of sale, dated 7 September 1937, certain properties were transferred to the transferee for a consideration of Rs. 1500. On the same day, there was an assignment of a usufructuary mortgage for a consideration of Rs. 1880. It was contended by the petitioning creditor in the Court below that it was the transfer of the whole of the judgment-debtor's property and that it was a fraudulent preference within the meaning of Section 54, Provincial Insolvency Act.

(2.) I should state that the petitioning creditor rested his petition on these transfers as being acts of insolvency under Section 6(c) read with Section 54, Provincial Insolvency Act. It would appear from the case which has been argued before us and from the order sheet in the Court below that the case in its initial state was based upon the act of insolvency contemplated by Clause (b) of Section 6 but at a later stage the petitioner relied upon Clause (c) of that Section. The learned Judge in the Court below has come to the conclusion, as a reason for dismissing the petition of the creditor, that even after the transfers on 7th September 1937, the debtor had more than sufficient property to pay his debts. It appears that only two known creditors of the debtor were the present appellant and the respondent and that the property remaining after the transfers to which I have referred was more than sufficient to pay the debts of the petitioner.

(3.) It was on 8 April 1937, that the transferee, who is a respondent before us, obtained a decree for the sum of Rs. 847-5-0 and again on 2 August, of the same year he obtained a mortgage decree valued at Rs. 2520-10-6. The appellant on the other hand obtained a Small Cause Court decree on 13 August 1937, for the sum of Rs. 504-14-6. With regard to these debts or the petitioner's portion thereof, the learned Judge in the Court below was of the opinion that the property left over after the transfers was sufficient to pay off the same. Mr. Rai, the learned advocate for the appellant at first argued that the debtor had transferred the whole of his properties. He also argued that, on a proper construction of Section 54, Insolvency Act, it was sufficient for him to show that by the transfer itself the debtor was reduced to the condition of being unable to pay his debts. In my judgment the contention of the appellant cannot possibly be supported on a plain reading of the Section. Section 54 of the Act provides: Every transfer of property, every payment made, every obligation incurred, etc, etc, by any person unable to pay his debts as they become due from his own money 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.