Khan Sahib Bangi Abdul Khadar Sahib and Others vs The Official Assignee of Madras

Arnold White, C.J.—This is an appeal against an order made in the insolvency of a man who carried on business in the name of Mahomed

Oosman Sahib & Co. He was adjudicated an insolvent on a creditor''s petition on the 18th May 1910. The order which is appealed against is an

order dated the 29th August 1911. By that order the court declared the sale by the insolvent to one Abdul Kadhir Sahib who is the appellant

before us, of certain houses and lands at Ambur belonging to the insolvent on the 5th January 1910, for the sum of Rs. 7,000, was void as against

the Official Assignee and ordered that the said Abdul Sahib should deliver to the Official Assignee, possession of the property in question. The

circumstances in which this order came to be made, so far as I can gather, appear to be these. On the 29th March 1911, a report was made by

the Official Assignee in this insolvency. The only observation with reference to the report which I think it is necessary to make for the purposes of

the question we have before us, is that the report contains no reference to the transaction of the 5 th January 1910 which has been set aside by the

order now under appeal. On that report the learned judge on the 24th April 1911 in an order which recites a motion of the Official Assignee, the

reading of, this report and of a report by a third party and a further report by the Official Assignee filed on the 21st April 1912 (which is not before

us) ordered a commission to issue directing a certain gentleman to take down the evidence of the appellant. That order was made under the

powers conferred by Section 36 of the Indian Insolvency Act which corresponds to Section 27 of the English Bankruptcy Act, 1883. There was a

further order with reference to the appointment of the Commissioner, but I need not refer to that because evidence on commission was never

taken, and the evidence which was directed by the learned judge to be taken u/s 36 of the Act was taken by the learned judge himself. After the

evidence was taken, the learned judge made an order u/s 36(5) of the Act. He declined to take further evidence. The original order only directed

the examination of the appellant; and on an application by the Official Assignee that the other witnesses should be examined, the learned judge

quite rightly--as it seems to me--upheld the objection that other witnesses could not be examined. The appellant was cross-examined at the first

instance on behalf of the Official Assignee and was then re-examined by Mr. Grant who appeared for the witnesses, The order states that the

Official Assignee had sought to prove that the appellant was in possession of certain properties under an alienation made on the 5th of January

1910, and that alienation having been made two years prior to the adjudication, was void as against the Official Assignee, unless it was made for

consideration and in good faith. The appellant had been examined. After discussing the appellant''s evidence the learned judge observes "" I am

satisfied that the transaction was not made in good faith or for valuable consideration . The transfer of property is void against the Official Assignee

u/s 55 of the Insolvency Act and u/s 36(5). I accordingly order Abdul Khader (the appellant) to deliver possession of the subject matter of the sale

of the 5th January 1910 to the '' Official Assignee.

I express no opinion as to whether the transaction of the 5th January 1910 is a transaction which can be set aside u/s 55 of the Insolvency Act,

if an application for that purpose is made in due course by the Official Assignee. All I say is--and I say it with the greatest respect to the learned

judge--that it seems to me it was not open to him in the proceedings which were then before him, to make an order declaring the transaction void

u/s 55. The materials on which the order was made was recited in the formal order dated the 29th August 1911 to which I have already referred.

Now the object, as I understand, of Section 36 is to enable the Official Assignee or any creditor who has proved his debt to obtain information

with reference to the property belonging to the insolvent. On that information proceedings may be taken for the purpose of impeaching transactions

which are voidable under the sections of the Act relating to voluntary transfers, fraudulent preferences, and cognate matters. The main object of

Section 36 is discovery. I speak with some confidence when I say that under English practice this is so. The English practice laid down in Section

27 of the English Bankruptcy Act to which Section 36 of the Indian Act closely corresponds except that under the English Act, the application for

summoning of a witness can only be made by the Official Assignee or by any creditor who has proved. No doubt u/s 36(Sub-section 5) there is

power in the Court on the application of the Official Assignee but not of a creditor if on the examination of the witness the Court is satisfied that he

has in his possession property belonging to the insolvent to order him to deliver to the Official Assignee the property which ''belongs to the

insolvent. Now, I do not think, it can be held, that the property in question in this ease at the time that this examination was held can be said to be

property belonging to the insolvent within the meaning of the Sub-section Prima facie it belonged to the man in whose name the title deeds stood,

and who had taken a transfer of property in January 1912, i.e., about 4 months before the date of adjudication. It may be that the transaction

comes within the purview of one of the sections of the Insolvency Act--it may be that it comes within the purview of Section 55 which enables the

court to avoid a voluntary transfer. It has been held that, u/s 47 of the English Act which is almost the same as Section 55 of the Indian Act, ''void''

means '' voidable'' the settlement whatever the transaction may be, being avoided not from its date, but only from the accrual of the trustee''s title.

See the ""case of Re-Brail Exparte Norton (1893) 2 Q.B. 381 S.C. 10 Mor. 166, and other authorities cited by Lord Justice Vaughan Williams in

his book on Bankruptcy, 9th Edition, page 266. The transaction which the Official Assignee sought to impeach in these proceedings is the

transaction which may or may not be voidable. The property which is the subject matter of the transaction cannot be treated as property belonging

to the insolvent within the meaning of Section 36(5) of the Indian Insolvency Act. The question whether a transaction amounted to a voluntary

transfer within the meaning of Section 55 has been decided only on the evidence of the one witnesses who was examined under the order made u/s

36 and without any substantive application to the court for an order that the transaction was a voluntary transfer. It is true that in this case the

witness who was examined was the party in whose favour the sale-deed was made; but it does not seem to me that this makes any difference on

principle. It seems to me that a question of this sort must be determined in the ordinary way contemplated by the Act and the rules i.e., by notice of

motion supported by evidence which the other side has an opportunity of answering it. Here all that happened, was that the man in whose name the

sale-deed was effected was cross-examined by the Official Assignee in proceedings under an order made u/s 36. This was the only evidence: the

report of the 29th March 1911, assuming it to be evidence, does not refer to this transaction and from the very nature of the proceedings, there

could be no other evidence. It may be that the witness was not in a position to put in evidence and it may be that no objection was taken at the

time to the making of the order. But it seems to me, for the purposes of the question whether the learned judge had power in the circumstances in

which the order declaring the transfer void, was made these considerations really have very little bearing on the question. I have given this case

very careful consideration. I can come to no other conclusion but that the learned judge had no power to make the order in the circumstances in

which it was made. I think that the order must be set aside with costs of the appeal. There will be no order as to costs in the court below. I certify

for two Counsel.

Oldfield, J.

I concur.