Neelakanta Iyer Subramania Iyer and Others vs Official Receiver and Others

Koshi, J.—These two appeals arise from an order passed by the District Judge, Quilon, in the exercise of the insolvency jurisdiction of the Court annulling certain transfers In I. P. No. 3 of 1100 the legal heirs of one C.K. Koyakunju were adjudicated insolvents by the Quilon District Court on 13-1-1103. The order was passed at the instance of the creditors and though I. P. 3 was presented by a single creditor with it was afterwards consolidated as many as ten other petitions filed by different creditors. I. P. No. 3 was the earliest petition and it was filed on 4-2-1100.

Koyakunju died on 2-6-1096. He appears to have been an affluent merchant at Quilon conducting trade in piece goods, yarn, provisions etc. After his death, his eldest son carried on the business on his own behalf and on behalf of the other heirs. He held a power of attorney from them. Koyakunju had left behind two sons two daughters and a wife. They were counter Petitioners 1 to 5 in I. P. 3. After the death of the father new concerns such as a tile factory, an oil mill etc., wore started Apparently things did not go well with these new ventures or with the old ones and within two or three years of Koyakunju''s death his legal heirs found themselves in rather embarrassed circumstances. On 3-1-1100 they executed a usufructuary mortgage deed for Rs. 75,000 in favour of the Appellant in A. S. 288 charging the bulk of their Immovable properties and under a lease deed of even date the mortgaged properties were taken back on lease by them. The entire mortgage money is alleged to have been received in cash. Those two documents were soon followed on 15-1-1100 by a hypothecation bond for Rs. 76859-15-0 in favour of the Appellants in A .S. 511 CHarging the equity of redemption over the properties comprised in them and also other items. The whole of the consideration money under this bond went in liquidation of the debt which the hypothecators owed to the hypothecatees. The order appealed from is one passed by the Court on an application made by the Official Receiver to annul these documents, the first two u/s 35, Travancore Insolvency Act, VIII [8] of 1090 (Section36, Provincial Insolvency Act 1907, corresponding to Section 53, Provincial Insolvency Act 1920), as fraudulent transfers and the last one as a fraudulent preference u/s 36 of the said Act (Section 37, Provincial Insolvency Act 1907 corresponding to Section 54, Provincial Insolvency Act 1920). The Official Receiver filed his application on 15-8-1103, but it was not until 3 3-1120 that the petition was disposed of.

The usufructuary mortgage and the leaseback are marked as Exs. I and II in this proceeding and she hypothecation bond as Ex. LXXV The learned Judge in the Court below found that Ex. I is unsupported by consideration except to the extent of Rs. 20,000 and that it is let, a bona fide transfer. With respect to Ex. LXXV the finding is that it was executed by the insolvents under pressure and in pursuance of a prior agreement in Vriechigom 1099. Notwithstanding this finding Ex LXXV was also annulled by the Court. This is how that happened.

These transfers were also mentioned as acts of insolvency in the various petitions filed by the creditors to declare the legal heirs of Koyakunju insolvents and the Court founded its order of adjudication on them as well. Exhibit G is the order of adjudication. In that order the Court stated:

Exhibit C (Ex. I in this proceeding) clearly evidences a transfer of the properties of the counter Petitioners with intent to defeat or delay their creditors, AS such it is clearly an act of insolvency.

Regarding Ex. LXXV (EX. D in that proceeding) the Court held: "Exhibit D clearly evidences a fraudulent preference. As such it is yet another act of insolvency." Both transfers were therefore held to constitute acts of insolvency. Other acts of insolvency were also, as indicated earlier, alleged and they were also found proved by the Court. In the Court below at the final hearing of the petition giving rise to these appeals the Official Receiver raised a preliminary objection that, as the order of adjudication had held that the impugned transfers constituted acts of insolvency that finding was conclusive as to the character of such transfers in all their legal consequences and that the transferees though not parties to that proceeding cannot challenge that finding in this proceeding and that their remedy was to appeal as persons aggrieved against the order of adjudication which so long as it stands must be taken to have determined their rights. This argument was raised on the strength of the Privy Council decision reported in Mahomed Siddique Yousuf v. Official Assignee of Calcutta and it found favour with the learned Judge with the result Exs. I and II as well as EX. LXXV were declared invalid and accordingly annulled. The concluding portion of the learned Judge''s order is in these terms:

The petition by the Receiver has to be allowed in respect of Exs. I and II both in view of the incompetency of the transferees to challenge the findings in the adjudication order and in view of the finding that they are fraudulent transfers and the prayer to annul Ex. LXXV has to be allowed in spite of the finding that it is not a fraudulent preference as the transferee is precluded from agitating the matter before this Court.

Soon after this decision was given by the Court below, the transferee under Ex. LXXV preferred an appeal against the adjudication order, in A. S. No. 285 of 1120 that appeal was filed on 7-4-1120 and as it was long out of time a petition to condone the delay was also filed along with it. The petition was numbered as C. M. P. 1262 of 1120. It is clear that that appeal was filed by way of abundant caution and that the observations their Lordships of the Judicial Committee made in the case referred to, that in oases similar to the one before their Lordships an extension of time to appeal from the order of adjudication should be granted ex debito justitiae gave encouragement to the party to prefer the appeal when more than seventeen years had elapsed after the order of adjudication was made. The petition was directed to be heard along with the appeal and all these appeals were heard together. When the hearing concluded we passed orders on C. M. P. 1262 allowing it. We propose to dispose of A. S. 285 by a separate judgment.

The view the learned Judge in the Court below took upholding the preliminary objection was very seriously challenged before us both in A. S. 288 and in A. S. 511. It was argued that the Privy Council decision and the English case it followed Exparte Learoyd (1879) 10 Ch. D. 3 : 48 L.J. B. K. 17 turned on the language of the particular statutes which governed the two cases viz.. the Presidency Towns Insolvency Act and the Bankruptcy Act, 1869, respectively and that the Provincial Insolvency Act, on which was modelled the Travancore Insolvency Act VlIl [8] of 1090, did not contain the provisions on which those two cases were based. This argument was raised in the Court below, but the learned Judge repelled it with these words:

So long as the question is not covered by any ruling of the High Court (Travancore) and in the absence of any difference in the relevant provisions of the Presidency Towns Insolvency Act and the Insolvency Act in Travancore I do not find my way to brush aside lightly the weight of the Privy Council ruling.

We are afraid the learned Judge is in error on both these points.

So long ago as the decision reported in Ouseph v. Neelakanta Iyer 1935 25 T.L.J. 866 the Travancore High Court had held that the creditor need not, before acjudication, establish that the alienations were fraudulent preferences and that the creditor had only to prove the act of insolvency viz, that the debtor made a transfer of his property which would, under the Insolvency Act, be void as a fraudulent preference if he were adjudged insolvent. In that case the learned Judges pointed out that in India questions relating to the alleged fraudulent transfers by the debtor do not arise at the time he is to be adjudged insolvent, but are more appropriately determined when the question arises for realising his assets. It is unfortunate this decision was not brought to the notice of the learned Judge. Though the decision relates to a case of fraudulent preference the view expressed there applies equally to cases of fraudulent, transfers as well. That the enquiry conducted prior to the adjudication is not full or complete is too well-known. The observations Sankarasubba Iyer, J. made at pp. 377.378 in Official Receiver Nagercoil v. Sthanunadier 1947 T. L. R. 360 bear this out fully. Had this aspect of the matter been borne in mind the learned Judge may perhaps not have followed blindly the Privy Council decision.

The second ground the learned Judge mentions for following Mahomed Siddique Yousuf v. Official Assignee of Calcutta is that there is no difference in the relevant provisions of the Presidency-Towns Insolvency Act and the Insolvency Act in Travancore. We regret we cannot accept the correctness of this statement. The two Travancore Insolvency Acts, Act VIII [8] of 1090 and Act VIII of 1108 are modelled on the Provincial Insolvency Acts of 1907 and 1920 respectively and there is hardly any change in the relevant provisions between the two Travancore Acts on the one hand and the two Provincial Acts on the other. The question whether the decision the Privy Council gave in Mahomed Siddique Yousuf v. Official Assignee of Calcutta could be applied or should be made to govern similar cases under the Provincial Insolvency Act had arisen for consideration before the High Courts of Rangoon, Madras and Nagpur and there is almost a consensus of opinion among those High Courts that the material provisions of the two Insolvency Acts-the Presidency-Towns Insolvency Act and the Provincial Insolvency Act- are different and that the ruling cannot, be applied to cases arising under the Provincial Act. We have said that the Travancore Act followed the Provincial Act and as we are in respectful agreement with the view expressed by the High Courts mentioned, it is needless for us to traverse the grounds covered by them. We shall content ourselves by quoting relevant extracts from some of those decisions, but before we proceed to do that it would be instructive to notice the relevant portions of Lord Atkin''s judgment in Mahomed Siddique Yousuf v. Official Assignee of Calcutta After setting out the facts His Lordship stated:

The learned Judge (Judge in Insolvency) dealt with the points taken by the official assignee. In the first place, it was said that the transfer having been found to be an act of insolvency in the order of adjudication could no longer be alleged by the transferee not to be void on that ground In the second place, it was said that apart from the effect of the adjudication order the evidence showed that in fact it was a fraudulent preference. The learned Judge was inclined to accept the first contention, which was based on the well-known case in Ex parte Learoyd. (1879) 10 Ch. D 3 :(48 L. J. Bk. 17 ), but appreciating that there was authority to the contrary in India in the decision of the Madras High Court, in The Official Assignee of Madras. Vs. O.R.M.O.R. S. Firm, would not express a final opinion on the point. On the facts, however, in evidence before him he found the intent to prefer proved. In the appellate Court the cans took a different turn. Both Judges expressed some doubt as to whether the intent to prefer was in fact proved; but they were both of opinion (following Ex parte Learoyd, (1879) 10 Ch.

D-3 (48 L.J. Bk. 17) that, the order of adjudication was conclusive and could not be disputed. Their Lordships entertain no doubt that this decision was correct. Ex parte Learoyd, (1879) 10 Ch. D 3: (48 L.J. Bk. 17) is well established in England; it was decided on the language of the Bankruptcy Act, 1869; both the relevant sections have been repealed in the Acts of 1883 and 1914 and the decision has taken its place as a leading case on this part of the law. The provisions of the Presidency Towns Insolvency Act (1909) are also in similar terms and their Lordships feel no doubt that the principles of the English decision are as valid in India as in England. No doubt it is anomalous that a decision affecting the right of a third party should be conclusively determined against him in his absence and even without notice to him; but the words of the section and the importance of maintaining the status of the debtor as determined by an order of adjudication and the necessity of securing the stability of the administration of the debtor''s estate once his status has been filed have been justly hold to outweigh the consideration of hardship to the private citizen. Their Lordships are of opinion, therefore, that the decision of the Madras High Court reported in Official Assignee of Madras v. O. R. M. O. R. S. Firm 50 Mad. 541 : AIR 1937 Mad. 526 was incorrect and must be taken to be overruled.

We venture to observe that but for the language of the concerned provisions, solely on considerations of policy set out in the judgment. His Lordship would not have decided the case as he did in favour of the Official Assignee. That, at any rate, is the view taken by some of the learned Judges who had to consider the applicability of this decision to the provisions of the Provincial Insolvency Act.

The difference in the relevant provisions of the two Acts is brought out, if we may say so with respect, very well in the Full Bench decision of the Madras High Court delivered by Sir Lionel Leach C.J. in Official Receiver v. Gopal krishniah AIR 1945. Mad. 66 : ILR (1945) Mad. 541. We make no apology to quote extensively from that judgment. Referring to Ex parte Learoyd the learned Chief Justice said:

In Ex parte Learoyd, (1879) 10 Ch. D 3: (48 L, J. Bk. 17) the Court of Appeal held that by virtue of Sections 10 and 11, Bankruptcy Act, 1869, an adjudication in bankruptcy was conclusive against a third party; but a third party whose title to property was affected by the adjudication order was a person ''"aggrieved" and therefore was entitled to appeal against the order of adjudication. Section 10, Bankruptcy Act, 1869; provided that an order of adjudication in bankruptcy should be published in the London Gazette and the production of a copy of the Gazette containing the order should be conclusive evidence in all proceedings of the debtor having been duly adjudged a bankrupt and of the date of adjudication. Section 11 stated that the bankruptcy of a debtor should be deemed to have relation back to and to commence at the time of the act of bankruptcy, or if more acts than one had been committed to have relation back and to commence at the time of the first of the acts proved to have been committed within 12 months of the order of adjudication. Similar provisions are to be found in the Presidency Towns Insolvency Act and this was the reason for the application in the Calcutta case of the principle settled by Ex parte Learoyd, (1879) 10 Ch. D 3: (48 L. J. Bk.17). Section 116 corresponds to Section 10, Bankruptcy Act, 1869, and Section 51 to Section 14.

It follows that if the relevant provisions of the Provincial Insolvency Act are on all fours with those of the Presidency Towns Insolvency Act the principle in Ex parte Learoyd, (1879) 10 Ch. D 3 must be applied to adjudications under the Provincial Insolvency Act, but not otherwise. An examination of the relevant section shows that there are wide differences between the two Acts. Section 116, Presidency Towns Insolvency Act, states that a copy of the Official Gazette containing a notice inserted in pursuance of the Act shall be evidence of the facts stated in the notice. Section 51 say that the insolvency of a debtor shall be deemed to have relation back to an commence at (a) the time of the commission of the act of insolvency of which an order of adjudication is made against him, or (b) if the insolvent is proved to have committed more acts of insolvency than one, the time of the first of the acts of insolvency proved to have been committed by him within three months next preceding the date of the presentation of the insolvency petition.

The section dealing with the publication of the order of adjudication under the Provincial Insolvency Act is Section 30 which says that notice of an order of adjudication shall be published in the Official Gazette, but it does not provide that the publication of the notice shall be evidence of the facts stated therein, as in the case with Section 116, Presidency Towns Insolvency Act. The relation back section is also different In the Provincial Insolvency Act it is Section 28 (7) which says that an order of adjudication shall relate back to, and take effect from the date of the presentation of the petition on which it is made. There is further difference between the two Acts. Section 54, Provincial Insolvency Act, says that every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered 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 there of be deemed fraudulent and void as against the Receiver and "shall be annulled by the Court." The words "shall be annulled by the Court" do not appear in the corresponding section of the Presidency Towns Insolvency Act, Section 56.

Therefore, we have these differences between the two Acts: (1) Under the Provincial Insolvency Act the publication in the Official Gazette of the order of adjudication is not evidence of the facts stated therein as is the case in the Presidency Towns Insolvency Act, (2) the order of adjudication under the Provincial Insolvency Act relates back only to the date of the petition asking for the adjudication, whereas in the Presidency Towns Insolvency Act it relates back to the very act of insolvency itself, and (3) the Provincial Insolvency Act requires a fraudulent transfer to be annulled by a direct order of the Court which is not the case under the Presidency Towns Insolvency Act. The first two are the most important of the differences.

The learned Chief Justice then refers to a decision by a Division Bench which he himself gave (Robert C.J. concurring) as a Judge of the Rangoon High Court in Ma Htwe v. Maung Pu AIR 1937 Rang. 27 : 14 Rang. 748 where it was pointed out that the decision in Ex parte Learoyd, (1879) 10 Ch. D 3 : (48 L. J. Bk. 17) had no application to that case because of the differences in the wording of the Bankruptcy Act, 1869 and the Provincial Insolvency Act. In the Madras Fall Bench case the discussion is concluded thus:

This decision (Rangoon case) was followed by this Court (Byers J.) in the unreported case in C.R.P. 1474 of 1948 The question has been fully argued before us and we consider that there is no room to doubt that Ex parte Learoyd, (1879) 10 Ch. D. 3: (48 L.J. Bk. 17) does not apply when the adjudication order has been passed under the Provincial Insolvency Act because; that Act does not contain the provisions on which the decision in Ex parte Learoyd, (1879) 10 Ch. D. 3: (48 L. J. Bk. 17) was based. Under the Presidency Towns Insolvency Act, as under the Bankruptcy Act, 1869, an order of adjudication operates to vest the property of the insolvent in the Official Assignee from the earliest proved act of insolvency and therefore, any alienation by the insolvent from the commencement of the act of insolvency is entirely inoperative. Under the Provincial Insolvency Act, the property does not vest in the Official Receiver until the date of the presentation of the petition which means that all unlawful transactions entered into prior to that date required to be set aside.

In view of the clear analysis we have above of the differences between the Presidency Towns Insolvency Act and the Provincial Insolvency Act we need here only point out that the same differences exist between the Presidency Towns Insolvency Act and the Insolvency Act in Travancore.

The applicability of the decision in Ex parte Learoyd, (1878) 10 Ch. D. 3: (48 L. J. Bk. 17) to cases arising under the Provincial Insolvency Act arose for decision before the Nagpur High Court in AIR 1947 161 (Nagpur) and AIR 1948 385 (Nagpur) The first case was referred to a Full Bench and the Full Bench by majority followed the Rangoon and Madras decisions referred to above. After comparing the relevant provisions of the English Bankruptcy Act, the Presidency . Towns Insolvency Act and the Provincial Insolvency Act the majority held that a transferee who was not a party to, the adjudication proceedings can contend in subsequent proceedings for annulment that his transfer was good notwithstanding that the order of adjudication was based on the alleged transfer as being an act of insolvency. The grounds for the opposite view given by the learned dissenting Judge Bose J., as he then was, are met in the two other judgments. If we may say so, the learned Judge is influenced in his decision more by considerations of policy than by the words of the relevant statutory provisions. The majority view was, of course followed in AIR 1948 385 (Nagpur) .

This view that the order of adjudication was not conclusive and that a transferee can in a subsequent proceeding to annul the transfer seek to uphold its validity was expressed in a Full Bench decision of the Travancore High Court in 1947 T. L. R. 360 referred to earlier. That decision was given nearly an year and a half after the order under appeal was passed. The decision in Mahomed Siddique Yousuf v. Official Assignee of Calcutta and the Rangoon and Madras cases referred to above are discussed both by Krishnaswamy Iyer C.J., and by Sankarasubba Iyer J. Though both of them preferred to base their conclusion more on general principles than on the differences between the language of the Presidency Towns Insolvency Act and the Travancore Insolvency Act, they arrived at the same conclusion as the learned Judges in the Rangoon, Madras and Nagpur cases came to. In negativing the argument that the order of adjudication passed on certain acts of the insolvent being regarded as acts of bankruptcy is conclusive as to the character of such acts in all its legal consequences Krishnaswamy Iyer C.J., observed as follows:

In any proceeding u/s 36, the parties engaged in the contest are the Official Receiver on the one hand, and the hypothecatee or transferee or creditor, on the other whose transfer or payment is challenged and is sought to be set aside. Neither of those persons is a party to the prior adjudication. A creditor seeks to adjudicate the insolvent and the adjudication proceeds upon a finding as to a supposition where it is based on a transfer capable of being complained against u/s 35 or 36. The adjudication regarding the transaction as regards transfer complained of may be stated in these terms. If the debtor wore adjudicated an insolvent which so far has not been done, his properties are vested with the Receiver which has not happened, the transfer of payment made by the debtor in favour of a third party is of a character that would enable the Receiver when he comes into existence to set aside the transfer or payment as against the prospective bankruptcy administration such an adjudication amounts to no more than a bare judicial opinion on which the Court may act for the only purpose of adjudicating the insolvent. To claim that such a finding operates as res judicata is an impossible contention. A plea of estoppels by res judicata must be certain and definite. The finding amounts to no more than the establishment of the plausibility of a contention put forward by a creditor and either objected to or acquiesced in by a debtor, the vital party interested in the truth of that allegation not being obliged to be before the Court. Such a finding Inter partes may by virtue of the Statute involve the adjudication in insolvency of the debtor. It may amount to an act of insolvency in the sense that the act so proved of the insolvent may be sufficient to adjudicate him an insolvent. The question of the setting aside of the transfer or payment is not anticipated by the provisions of the Statute to a period prior to the Insolvency adjudication. The real question arises for decision only when the Official Receiver seeks to set aside the transaction and the adjudication then rendered would certainly be res judicata not merely between the Receiver and the transferee but as regards all persons concerned in the bankruptcy administration and no more For the void character of such transfer is limited as has been hold in Sivaramakrishna Iyer v. Narayana Vadhyar 1945 T. L. R. 652 to the extent to which the transfer is a removable obstruction to the bankruptcy administration. Really the High Court of Madras, bound by the decision of the Privy Council in Mahomed Siddique Yousuf v. Official Assignee of Calcutta , was obliged to seek the distinguishing features of the Provincial Insolvency Act from the Presidency Towns Insolvency Act, With the greatest respect, we venture to express the opinion that the findings of fact constituting the grounds on the basis of which the insolvency adjudication is made do not constitute judgment in rem and such findings, cannot operate as res judicata for the reasons mentioned above The adjudication involved on a petition in insolvency is different, in character and in respect of the parties from the adjudication called for when a Receiver applies to act aside a transfer as being void against bankruptcy. A hypothetical finding it is, that is called for, in the petition for adjudication of an insolvent and the actual and definite decision is postponed though it is in a small measure anticipated without the vital party interlaced in it before Court. After the insolvency administration has commenced it is open to the Official Receiver, to leave the offending transfer altogether untouched, but if he should seek to set it aside, the insolvency Court is then called upon to decide whether the hypothetical decision regarding the transfer entered at the time of the adjudication petition was rightly arrived at or not Where the transfer is not avoidable, it may induce the conclusion that the adjudication ought not to have been made and jurisdiction is reserved to annul ,the adjudication. See Section 35 of Act VIII [8] of 1108. The decisions in Radhakishin v. Mt. Gangabai AIR 1928 Sind 121 : 22 S. L. R. 1(5) and Ouseph v. Nilacanta Iyer 25 T. L. J. 366, have held this the adjudication of an insolvent on the ground of fraudulent transfer or preference does not conclude the parties on an application to Bet aside those transactions after the adjudication. We therefore hold agreeing substantially with the decision of the Full Bench in Official Receiver, Guntur v. Gopalakrishniah, AIR 1945 Mad. 66 : I. L. R. (1945) Mad. 541, that it was open to the insolvency Court to arrive at a different conclusion regarding (he nature of the hypothecation bond and its liability to be set aside as a fraudulent preference. The argument of res judicata must therefore stand repelled.

Sankarasubba Iyer, J. who wrote a separate but concurring judgment observed that he cannot perceive any such material difference between the two Acts as to compel enunciation of different rules with regard to the matter under discussion, though we cannot subscribe to that view, what the learned Judge has to say in repelling the argument as to the conclusive character of the adjudication order based on general principles may usefully be quoted here:

I feel however little doubt that the rule laid down in The Official Assignee of Madras v. O. R. M. O. R .S. Form. 50 Mad 541: AIR 1927 Mad. 526 has to be accepted as the correct one in this matter. If the intention of the Legislature was that the finding with regard to the act of fraudulent preference entered at the time of adjudication concluded the transferee, the wording of Section 54 would have been otherwise. Section 54 compels the Official Assignee to apply for avoidance of transfer on the ground of fraudulent preference in all cases. It does not say that the Official Receiver need not seek for such avoidance in cases where the debtor has been adjudicated an insolvent on the ground of an act of fraudulent preference. This Court had already taken this view in Ouseph v. Neelakanta Iyer 25 T. L. J. 366. Some of the British Indian High Courts, besides the Madras High Court in Official Assignee Madras v. O. R. M. O. R. S. Firm 50 Mad. 541 : AIR 1927 Mad. 526 adopted the same. Ma Htwe v. Maung Pu AIR 1937 Rang 27 : 14 Rang. 748 (Receiver) followed Official Assignee Madras v. O. R. M. O. R. S. Form 50 Mad. AIR 1927 Mad 526 Radhakishin v. Mt Gangabai AIR 1928 Sind 121 : 22 S.L.R. 105 also took same opinion. As is pointed out in the Sind case, the conclusive nature of the order of adjudication is confined to the status of the insolvent alone and cannot be attached to the reasons or grounds on which the adjudication is based To adopt the rule laid down in Mahomed Siddique Yousuf v. Official Assignee of Calcutta will lead to serious inconvenience. It is a matter of common experience at least in Courts here that an inquiry on a petition for adjudication is held more or less in a summary manner. It therefore often happens that the Court is not at that stage put in possession of the full materials which are essential to enable it to determine properly and satisfactorily the question whether a transfer is a fraudulent preference. The only person interested in upholding the transfer is the transferee and he is nowhere in the picture at the time of adjudication. It will therefore be positively unjust to conclude him by an order passed behind his back. I have therefore no hesitation in holding that the principle laid down in Official Receiver v. Gopalakrishniah AIR 1945 Mad. 66 : I. L. B. 1945 Mad. 541 and Official Assignee, Madras v. O R M. O. R. S. Firm 50 Mad. 541 : AIR 1927 Mad. 526 is the sounder one and has to be adopted.

Habeeb Mobamed J., the third Judge constituting the Pull Bench, concurred with the judgments delivered by his learned colleagues, there is, therefore, before us, the unanimous opinion of a Full Bench of the Travancore High Court that the adjudication order cannot be treated as conclusive for all purposes. The learned Counsel for the Official Receiver however contended that we should not attach to that decision the importance or weight which a Divivision Bench would ordinarily assign to a Full Bench ruling. It was pointed out that the transfer impugned in that case as a fraudulent preference was made beyond three months of the presentation of the insolvency petition and that the order of adjudication bad itself reserved the question as to whether the transfer was liable to be set aside to a later stage of the proceeding. It was therefore argued that the learned Judges of the Full Bench need not have, in these circumstances, considered this point at all and their observations have no greater value than as obiter dicta. We do not in this case want to consider whether the expressions of opinion on the present point in controversy made in that case by the Full Bench should be treated as obiter. The point becomes important only if we are following the decision as one binding on us. The view the Full Bench took on the point in controversy here, as has been shown above, has ample support in decided cases elsewhere and if we may 3ay so with respect, the view agrees with our own views on the matter. There is also no gainsaying that the two learned Judges who wrote separate judgments in that case have made valuable contributions to the legal learning on the subject. Following the authority of the cases mentioned above, we hold that the order of adjudication in this case cannot be held to be conclusive as to the legal character of the impugned transfers and that we have to decide the question of their validity or otherwise on their respective merits.

We shall first take up Exs. I and II which form the subject of the appeal in A. S. 288. The learned Judge in the Court below found that the mortgage, Ex. I, was supported by consideration only to the extent of Rs. 20,000 and that the mortgagee had not paid to the mortgagors the balance of Rs. 55,000. On this conclusion and the reasons the learned Judge assigned therefore, the decision that the document had to be set aside as a fraudulent Trans for came almost as a matter of course. We are, however, unable to concur in the view of the learned Judge that the mortgagee had not paid to the mortgagors Rs. 55,000 of the consideration due under Ex. I. Before we proceed to state our reasons for this conclusion, it has to be mentioned that the Official Receiver has filed a memorandum of objection challenging the correctness of the finding of the Court below that the document is supported by consideration to the extent of Rs. 20,000. There is no substance in that objection and on that part of the case it is really unnecessary to add anything to what the learned Judge in the Court below has said. (His Lordship then referred to the evidence and proceeded.)

15-20. Having found that Ex. I is fully Supported by consideration, the next question we have to address ourselves about is whether Ex. I is a transfer made in good faith. So long ago as the decision in Twynes case (1601) I Smith''s L.C. (11th Edn.) p. 1 it was laid down that "a good consideration does not suffice if It be not bona, fide". It is only transfers made in good faith and for valuable consideration that would escape the mischief of Section 35 (now S 53) of the Insolvency Act. It is however settled law that the expression "in good faith" does not contemplate that both parties to the | transaction should act in good faith. Good I faith on the part of the transferee is alone required. See Halshury''s Laws of England, 2nd Edn. vol. II , para 491 at p, 364; Williams on Bankruptcy 1949 Edn. p. 356; Mulla''s In solvency para 6 '' 8 at p. 434 and the decisions in Mackintosh v. Pogose (1895) 1 Ch. 505 : (64 L. J. Ch. 274 ), Kullappa Reddiar and Others Vs. Al. Vr. St. Veerappa Chettiar and Others, and Ramananda Paul and Others Vs. Pankaj Kumar Ghosh, Receiver and Others, Mackintosh v. Pogose, (1895) 1 Ch. 505 : (64 L. J. Ch. 274) deals with a case that arose u/s 47, Bankruptcy Act (1883) which provision can, for our present purpose, be taken to correspond to the section we are dealing with now and the relevant portion of the headnote to that case reads:

In order to constitute a ''purchaser in good faith'' within Section 47, Bankruptcy Act, 1883, it is sufficient, there be good faith on the part of the purchaser; it is not necesary that both parties to the transaction should act in good faith.

In the judgment Stirling J pronounced in that case, at p. 510 of the report, the learned Judge is seen to have observed:

I think the meaning of the words of the 47th section i. e., ''purchaser or incumbrancer in good faith and for valuable consideration'' is simply this: A person who has for valuable consideration acquired property affected with some infirmity without notice of the existence of such infirmity.

This construction of the relevant words of the section which words occur in Section 35 as well has been accepted as a correct and authoritative exposition of their meaning in subsequent decisions in England. Indian decisions bearing on the subject have accepted and followed that interpretation.

However, in deciding whether the transfer we are concerned with here is one made in good faith we will first see how the term "good faith" is defined in Travancore General Clauses Act, II [2] of 1072. Section 2 (6) of the said Act states:

Nothing is said to be done or believed in good faith which is done or believed without due care and attention.

This definition has since been reproduced in the Travancore-Cochin Interpretation and General Clauses Act, VII [7] of 1126. See Section 2 (14). It must be noticed, that the definition we obtain in these two Acts differ from the definition which the Cochin General Clauses Act Ill [3] of 1079 and the Indian General Clauses Act (x [10] of 1897) give to the expression "good faith". Section 2 (13), Cochin General Clauses Act and Section 3 (20), Indian General Clauses Act state that:

a thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not.

The new-repealed Travancore General Clauses, Act and the present Travancore Cochin General Clauses Act adopt the definition of the Penal Code and under that definition the question of honesty is immaterial. The definition assigned to "good faith" by the enactment which governs this case, namely, the Travancore General Clauses Act contains a stricter definition than that adopted by the Cochin or the Indian Act. If a thing is done "negligently" it cannot be said to have been done with "due care and attention" even though it may be done honestly. Good faith in act or belief requires due care and attention to the matter in hand. The absence of good faith means simply carelessness or negligence. Whether a particular transfer is one made in good faith must depend upon its own circumstances, and always in such cases the question is one of fact.

These references to the connotation of the term "good faith" are found necessary for two reasons, one is that the decisions of the Indian High Courts bearing on the corresponding sections of the Provincial or the Presidency Towns Insolvency Acts cannot obviously serve as a safe guide for us here where good faith has to be understood differently than in jurisdictions where those acts are in force. Courts dealing with similar cases under the Provincial or the Presidency Towns Insolvency Acts have to decide those cases in the light of the definition which the General Clauses Act X [10] of 1897 gives to the expression, "good faith". Secondly, the lower Court with its finding that the document is not supported by consideration for more than two-thirds the amount purported to be advanced there under, naturally found the transaction to be a dishonest one. With the altered finding we have now recorded that the document is fully supported by consideration, the circumstances which surrounded the transaction and the conduct contemporaneous and subsequent of the parties have to be closely scrutinised with a view to find out whether the mortgagee acted with due care and attention.

We shall now proceed to examine the circumstances under which Ex. I happened to be executed It is now well-settled that the burden to make out circumstances which invalidate a transfer made by an insolvent on the eve of his insolvency is on the Official Receiver or other persons seeking to avoid it and not on the alienee. Before the lower Court the alienees under Ex. I and Ex. LXXV would seem to have taken upon themselves the responsibility to show that their respective transfers are valid and no complaint was made by them before us that the wrong impression as to the onus of proof under which the inquiry was held has in any way prejudiced their interests or a fair trial of the case. Further, when all the circumstances of the case have been ascertained so far as the parties have thought fit to ascertain them, the question as to the onus of proof is really immaterial and the decision must be made on the whole of the circumstances appearing on the evidence. We shall proceed to discuss the evidence on that basis.

That the mortgage Ex. I now impugned came into existence at a time when the mortgagors, since declared insolvents, were in really embarrassed circumstances admits of no doubt on the evidence on record. In our opinion the lower Court correctly gauged the position. The following extract from its judgment may usefully be quoted here:

Exhibit G the copy of the adjudication order shows that the debts of the mortgagors amounted to 21/2laks of rupees and that by the end of 1099 they had practically stopped their business and closed their trading houses. The evidence in the case specially the correspondence between the insolvents and Ex. LXXV hypothecatee farther establishes that the insolvents were hard pressed for money and that their earnest attempts to raise funds to meet their claims failed. The Official Receiver Mr. V.N. Narayana Pillai who is a leading Advocate of the Quilon Bar for the past so many years swears that by the end of 1099 the business of the insolvents practically collapsed and none of the Banks, Hundi merchants and business men in Quilon were prepared to advance money to the insolvents. It was at this juncture that the insolvents ruts up to Monkompu for help.

In a subsequent portion of the judgment it has again stated thus:

As already mentioned Ex. I was executed at a time when the business of the insolvents had practically stopped, when they were involved in debts to the extent of 21/2 lacks, when the local Hundi firms and Banks were reluctant to advance any amount to the insolvents and when according to evidence of the Official Receiver a casual enquiry at any Bank or Hundi shop would have revealed the real state of affairs about the trade of the insolvents.

Mr. V.N. Narayana Pillai, who is referred Toby the lower Court as a leading Advocate of the Quilon Bar, is very definite in his evidence that round about 1099 the credit of the mortgagors was at a very low ebb at Quilon and that the various businesses they were conducting had almost come to a standstill. His testimony shows and there is also other evidence that there were more than one limited banking concern and several indigenous money lending firms doing large scale business at Quilon and that a casual enquiry in Quilon Town would have disclosed the real financial position of these mortgagors. The fact that the mortgagors who at one time were conducting flourishing trades in various lines in that town had to run up to an up-country financier, fifty or more miles away from Quilon, to borrow a sum like Rs. 75,000, must certainly have put the mortgagee on guard to ascertain what the real circumstances which lead to that event were. The mortgagee and his sons admit in their evidence that even during the course of the negotiations for the loan they were told by the mortgagors (l and 2) themselves that they owed a debt of Rs. 30,000 or more to the Imperial Bank and that part of the money proposed to be borrowed would be paid to the Imperial Bank. C. P. W. 2 further states that his father, his brother and himself know during the course of the negotiations that the borrowers had be sides the debt due to the Imperial Bank other debts as well and that in all there were not less than ten or twenty creditors. Though C. P. Ws. l and 2 say that before the loan was advanced they went and made some local enquiries regarding the financial condition of the borrowers it would seem to be clear that they never oared to pet into contact with anyone of the creditors. Why the Imperial Bank was pressing for the return of their loan or why other Banks or money-lenders at Quilon were failing the borrowers in their hour of need was apparently (SIC) adverted to. A reading of the deposition of the mortgagee and his sons would seem to suggest that their enquiries were limited to the sufficiency of the security offered. In fact the mortgagee admits that his reply to the request for the loan was that if sufficient unencumbered properties could be given as security and if interest at 9 per cent per annum is agreed upon he would be willing to advance the money. All the enquiry his sons conducted on the spot would seem to have been directed towards satisfying themselves as to the sufficiency of the security and to whether the title deeds thereto were in order. If any enquiry was made regarding the financial stability of the borrowers it is difficult, in the face of the evidence of Mr. V.N. Narayana Pillai and the materials furnished by the correspondence the borrowers were having with the Appellants in the connected appeal, to believe that their financial embarrassments would have failed to come to the knowledge of C. P. Ws. 1 and 3. Of the several persons whom C. P. Ws. 1 and 2 mention that they enquired of, only one of them, C. P. W. 6 has been called as a witness. He is an interested witness and admittedly he had no direct information about the condition of the finances of the borrowers. In all the circumstances of the case, we feel therefore constrained to hold that no enquiry worth the name was made regarding the general financial condition of the borrowers and that if any was made it was very perfunctory. On the admitted facts there were materials to put the mortgagee on enquiry and if in spite of them no proper enquiry has been made it is difficult to say common prudence or due care and attention have been shown by the mortgagee in advancing this large sum of Rs. 75,ooo to persons who were in embarrassed circumstances.

Again, the mortgagee and his sons have, as mentioned already, admitted that they knew even during the stage of the negotiations that the borrowers had debts to the extent of Rs. 50,000 or thereabouts. Still not a pie is seen reserved in the document for payment to the creditors. The mortgagee and his sons know the Imperial Bank was a principal creditor and no prudent investor would have acted so recklessly as to hand over all the Rs. 75,000 into the hands of the borrowers themselves. Yet, that is what the mortgagee and his sons did in this case. As the lower Court has observed, the recital in Ex. I as to why the borrowing was made is conveniently vague. Though Ex. U, the replication filed in O. S. No. 24 of 1102 states that the amount was advanced to liquidate the debts of the borrowers during the course of the present enquiry the mortgagee and his eons attempt to depart from that case by stating that part of the money was intended for the conduct of the various businesses conducted by the borrowers and the balance alone was for discharge of the debts. It is clear that this change of front is to explain away why no amount was reserved for payment to the creditors. Further, in discussing the evidence as to the payment of consideration it has been shown that no pie was advanced before the document was executed or registered, but what the document recites is that the entire consideration was made good on some prior date under a receipt passed by mortgagor 1. No doubt an explanation was attempted that that wrong recital found its place in the document through a mistake on the part of the scribe. That explanation has not impressed us any more than it did the Court below and though we are not prepared to go to the extent that Court did in ascribing a dishonest motive to the mortgagee for making that recital, we cannot help observing that there is no satisfactory explanation for an untrue recital being made. In all the, ciruumstances of the case, we cannot, due regard being had to the meaning we have to attribute to the expression "good faith," find that the mortgage Ex. I is one made in good faith. The mortgagors were adjudicated insolvents on a petition presented one month after the transfer. We therefore agree with the lower Court that that document has to be annulled, and accordingly affirm the lower Court''s decision regarding Exs. I and II.

A further question debited at the Bar in connection with this appeal was whether in case we were to affirm the lower Court''s decision what effect or consequences would follow it. It goes without saying that the properties would revert to the estate of the insolvents free of the mortgage. The further question is to what relief, if any, the mortgagee is entitled with respect to the moneys advanced by him. We have teen that Rs. 63,000 out of the consideration money had gone into the hands of the mortgagors themselves and that the balance of Rs. 12,000 alone had been utilised for discharge of their debts. There is no knowing what they did with the Rs. 63,000 received by them. That they acted fraudulently in raising this money and keeping it to themselves is beyond dispute. The mortgagee''s conduct in acting so improvidently as to hand over all that amount to the mortgagors was what permitted the latter to enjoy the fruits of their fraud and it is not therefore open to the mortgagee to claim that amount in the insolvency even as an unsecured creditor. It has been held in numerous cases that cash items of consideration in transfers set aside by the Insolvency Court advanced at the time of the execution of a fraudulent transfer cannot be allowed to be proved as a debt as the same is advanced for the purpose of carrying out the fraud. Those cases have also decided that when a transfer is annulled the alienee may prove just antecedent debts which existed before the fraudulent transfer but were included in the consideration therefore. Whether the alienee could rank as a secured creditor would depend upon whether the antecedent debt was itself secured or not. Among decided cases of the High Courts in India which lay down these rules may be cited, Devi Dial v. Sundar Das AIR 1919 Lah. 211 : (65 P. R. 1919); Amin Chand v. Manohar Lal AIR 1983 Lah. 211 :(141 I. C. 336); Mai Chand v. Ram Jas AIR 1939 Lah. 145: (41 P. L. R. 575 ); Loorthia Odayar Vs. Gopalasami and Another, and T.R. Ramaswami Aiyangar Vs. The Official Receiver of Coimbatore, An English case decided SC early as 1884 takes the same view. See Ex parte Chaplin, In re Sinclair, (1884) 26 Ch. D 319: (53 L. J. Ch. 732).

In the above view of the law, as the evidence in the case stands, the mortgagee would be entitled to claim as an unsecured creditor the Rs. 12 000 paid by him to the creditors. But the learned Counsel for the Official Receiver pointed out that of these Rs. 12,000 Rs. 3,500 paid under Exs. 64 (a) and 65 (a) were paid on the day the insolvency petition was presented in Court and that the sum of Rs. 6000 paid under Ex. 61 (a) was paid long afterwards on 31-2-1100. With respect to the latter sum the mortgagee had as per Ex. LXI dated 24-1 1100 promised the creditor concerned that he would pay him the amount before 10-2-1100. But apart from that, so long as the mortgagee paid off bona fide creditors we fail to see what objection there can be to his being permitted to stand in their shoes as unsecured creditor. The fact that some amounts were paid on the day the insolvency petition was presented or that another sum was paid days afterwards cannot, in our opinion, in the circumstances of the case, prevent the mortgagee from ranking in the schedule of unsecured creditors with respect to those amounts as well. None of those creditors whose debts have been paid has any right to claim their amounts again and the estate of the insolvents cannot be allowed to be benefited by the payments made by the mortgagee.

A further fact we would state in this connection is that we do not want it to be concluded in this proceeding that no amount out of the Rs. 63,000 which went directly into the hands of the mortgagors had been utilised for payment of their creditors Though there is no positive evidence that any portion thereof was so utilised, C. P. Ws. 1 and 2 have said in their evidence that according to their information an amount of Rs. 10,000 out of the Rs. 55,000 paid under Ex. LIV was paid to the Imperial Bank and the evidence of C. P. W. 8 is to the effect that the entire amount of Rs. 20 000, which alone be admitted was received towards the consideration for Ex. I, has been utilised for discharge of the debts. In view of the above evidence, we would leave it open to the mortgagee to prove in the insolvency proceeding what amounts, if any, have in addition to the sum of Rs. 12,000 referred to above been used by the insolvents to pay off their just antecedent debts.

We shall now proceed to discuss A. S. No. 511. The question there is whether Ex. LXXV is hit by the provisions of Section 36, Travancore Insolvency Act VIII[ 8] of 1090 corresponding to Section 54 of the present Act. The learned Judge in the Court below held that the transfer evidenced by that document did not amount to a traudulent preference within the meaning of the section. All the same that document was also annulled in view of the learned Judge''s decision that the order of adjudication which had held that the transfer amounted to an act of insolvency was conclusive as to the character of the transfer in all its legal bearings and that the transferee was therefore incompetent in this proceeding to plead that the transfer was valid. We have in the earlier paragraphs of this judgment taken a different view and held that the order of adjudication had no such effect. It was hence pointed out that both the appeals before us now have to be disposed of on the merits of the respective transfers. The Official Receiver has sought to support this lower Court''s decision annulling Ex. LXXV on the ground that it is a fraudulent preference and has also filed a memo of objections attacking the contrary finding of The Court below.

Admittedly the Appellants'' firm were longstanding creditors of the insolvents and the amount of Rs. 78,854 11-0 which forms the consideration for Ex. LXXV was due to the Appellants on its date in respect of trade dealings Chat had gone on between the parties. The learned Judge in the Court below held the transaction to be valid on certain grounds which are recognised as exceptions that would take a transfer out of the purview of the relevant section of the Insolvency Act. The whole case relating to Ex. LXXV is discussed in one short paragraph and it is convenient to quote that paragraph here:

The next question for consideration is whether Ex. LXXV is a fraudulent preference. It is admitted that the insolvents were Indebted to the hypothecatee to the extent of the entire amount covered by Ex. LXXV. It remains to be seen whether it is a voluntary transfor effected by the debtor with a view to give undue preference to the hypothecatee. The evidence of the hypothecatee as well as of the insolvents 1 and 2 clearly establish the fact that Ex. LXXV came to be executed by the insolvent duo to the pressure exerted by the hypothecatee and in pursuance of a prior agreement between them to secure the amount due to the hypothecatee, and that actually three unregistered hypothecation bonds were executed, the first of which was in Virschigom 1099. The truth of those facts is established beyond donbt by the course of correspondence between the hypothecatee and the insolvents ranging from Ex. LXXXII dated 7-1-1099, The relevant letters are Ex. LXXVI, LXXXIII, LXXXV to LXXXVI, XCVI, CIV, and CV, and those contained in pp. 403, 414, 420, 433 and 478 of Ex. CVIII and pp. 17, 37 and 39 of Ex. CIX. Exhibits LXXVI, CIV, CV, CVI and p. 17 of Ex. CIX refer to the agreement to execute the hypothecation bond and the actual execution of unregistered hypothecation bonds ........ I find that Ex. LXXV was executed by the insolvents under pressure and in pursuance of a prior agreement in Vrischingom 1099 to secure the amount due to the second counter-Petitioner.

The above extract makes it clear that the learned Judge''s decision in favour of the validity of EX LXXV is based on two circumstances, namely, (I) that it was executed in pursuance to an agreement in Vrischingom 1099 and (a) that it was executed under pressure. We have given our most anxious consideration to the learned Judge''s view as also to the learned arguments addressed at the Bar to support it, but we regret we cannot find our way to affirm that view or to accept the arguments urged on behalf of the Appellants. The whole argument centred round the alleged (SIC) agreement and the case that the transfer was affected under pressure In our view, on the admitted facts, it is difficult to accept either ground.

Before we take up the discussion of the two grounds on which the avoidance of the transfer was sought to be resisted, it is convenient to analyse what elements have to be established before a transfer could be avoided u/s 36 (now Section 54). Section 36 (l) provides as follows:

Every transfer of property or of any interest therein, every payment made, every obligation incurred, and every judicial proceeding taken or suffered 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.

Sir Dinshah Mulla has in his Tagore Law Lectures on the Law of Insolvency in British India Bet out the purport of the corresponding provisions in the Presidency-Towns Insolvency Act and the Provincial Insolvency Act in the following terms (10th lecture, p. 441):

Every transfer by a debtor of his property (this includes a mortgage or a charge), every payment made, every obligation incurred, and every judicial proceeding affecting his property taken or suffered by him, is fraudulent and void as against the Official Assignee or Receiver provided five conditions are fulfilled. These conditions are:

(1) The debtor must at the date of the transfer or payment be unable to pay from his own money his debts as they become due;

the transfer or payment must be in favor of a creditor;

(3)the transfer or payment in fact prefers one creditor ever others;

the transfer or payment must have been made with a view of giving such creditor a preference over other creditors; and

the debtor must be adjudged insolvent on a petition presented within three months after the date of the transfer or payment.

If any of the above conditions is not satisfied, the transaction will not be void as a fraudulent preference. Thus it is not sufficient that a creditor is preferred, if it was not the insolvent''s object to prefer him; and even if it was, the transfer or payment cannot be impeached as fraudulent if no insolvency petition is presented within three months after the date of the transfer or payment.

Though the Official Receiver did not, as he ought to have done, first lead evidence to establish that the conditions referred to above exist in this case, on the evidence now before us it can, in our opinion, be stated with confidence that conditions 1 to 3 and 5 have been clearly made out. The only doubt or dispute would be about condition 4 and the question whether that is also satisfied must depend on what view we take of the legal implications of facts admitted or proved. The correspondence that passed between the Appellants on the one hand and insolvent 1 on the other placed on the evidence in the case and referred to in para. 7 of the lower Court''s judgment extracted above would clearly show that long before the execution of Ex. LXXV the insolvents were unable to pay from their own money their debts as they became due. Some of those letters show that strenuous efforts were made to raise funds from upcountry money-lenders and that several of such attempts failed. The debtors had no credit in Quilon and the creditors were all pressing hard for payment. The evidence of Mr. Y.N. Narayana Pillai, the only witness examined on the side of the Petitioner and who was the Official Receiver of Quilon when the debtors were adjudicated insolvents, shows that even he was approached for a loan and that he was not inclined to grant it. The letters insolvent 1 sent in answer to the Appellants'' demands for payment make it abundantly clear that he or other debtors had no money with them, that their personal credit was entirely lost and that any payment by them of their debts was out of the question without money being raised on the security of immovable properties. The first requirement of the section is therefore well established on the evidence. In fact this position was not disputed.

Nor does the evidence make it even arguable that conditions 2, 3 and 5 referred to above have not been satisfied in the case. C. P. W. 12 is one of the Appellants and C. P Ws. 8 and 10 are, as noticed already, insolvents 2 and 1 respectively. Their oral evidence as also the documents they prove, clearly make out that the Appellants had to realise from the insolvents the amount mentioned in the hypothecation bond Ex. LXXV. Exhibit CII is the ledger book of the insolvents for the year 1099 and that shows that the balance at the end of the year was Rs. 78.000. See pp. 211 and 212. As this aspect of the case is not disputed, it is unnecessary to pursue it further. As for condition 3, it is very clear that Ex. LXXV really prefers the Appellants over other creditors. When practically the whele of the immovable properties-the equity of redemption over those comprised in EX. I And several other unencumbered items- are by pothecated to the one creditor, leaving almost all other creditors without any security or even means of payment, the transfer, if held to be valid would really defeat the main purpose of the Insolvency law, namely, equal distribution among all creditors. The document, as noticed earlier, was executed on 15-1.1100 and registered on the next day. The petition on which the adjudication order was passed, I. P. 3 of 1100, was filed in Court on 4-2-1100.

We have next to see whether condition 4 also exists in the case or whether the transfer happened to be made under circumstances relied upon by the Appellants. In order that a transfer may be avoided as a fraudulent preference the law requires that the dominant motive with which the transfer is effected was to prefer the creditor in whose favor the transfer is made. In Para. 637 at p. 443 of Mulla''s Insolvency (Lecture 10) the law is seen stated thus:

In order to avoid a transaction as a fraudulent preference it is not sufficient that the creditor was preferred; it is essential that the transfer or payment was made ''with a view'' to giving a preference to that creditor over the other creditors. The view to prefer must have been the dominant or substantial view; it is not necessary that it should have been the sole view. If the view to prefer was the sole view no difficulty arises.

The leading English case on the point is Ex parte Hill; In re Bird, (1853) 23 ch. D. 695: (52 L. J. Ch. 903), and the head-note to that case may usefully be reproduced here:

In order that a payment of money or a transfer of property made by a debtor in favour of one of his; creditors should be void as a fraudulent preference u/s 92, it is sufficient that the preferring the creditor should have been the substantial, effectual, or dominant view with which the debtor made it; it is not necessary that it should have been his sole view.

This ease has been followed in several Indian decisions but it is unnecessary to refer to them here, We would, however, mention that the Travancore High Court had adopted and applied the rule of that decision in the case reported in Thoma v. Joseph Panjikaran 10 T.L.J. 146. We have to examine the circumstances under which Ex. LXXV happened to be executed in the light of the above law.

The learned Judge in the Court below has found that there was an agreement between the parties so early as Vrischigom 1099 to give security of immovable properties for the outstanding balance then due to the Appellants. The learned Judge has also found that a hypothecation bond in respect of the properties comprised in Ex. I was first executed in Vrischigom at the time that agreement was made and that a fresh bond was executed in Kumbhom and a third one in Edavom. All these bonds were admittedly for the balances due on their respective dates and no fresh advence was made under any of them. None of these three bonds was registered and the evidence of the two insolvents (C. P. Ws. 8 and 10) examined in the case and of C.P.W. 12, one of the Appellants, is to the effect that the arrangement between them was that the insolvents would raise money elsewhere and pay the Appellants. Instead of having the bond (first) registered renewals or substituted documents were brought into existence within the intervals of three months the time limit prescribed by Section 16, Travancore Registration Act, for registering documents after their due execution. C.P. W. 12 also wears that he refrained from getting any of these bonds registered at the instance of the insolvents and for their benefit. They were afraid registration would attract publicity and spoil the whole game. The game they had in view was that the Appellants should be paid in full and that by raising money from other sources on the security of immovable properties. The correspondence that passed between the parties unmistakably shows that the insolvents were in difficulties even from the time of the first bond in Vrischingom 1099 and that the Appellants were fully aware of the embarrassed condition of their debtors. It is more or less common ground that all the properties charged under Ex. I were included in these unregistered bonds and that those properties constitute the bulk of the immovable properties belonging to the insolvents. It is impossible to look upon this conduct of the insolvents in executing documents in favour of the Appellants charging the bulk of their properties with a view to give them security for past debts as anything but an act of insolvency within the meaning of Section 6, Insolvency Act, and on fact admitted by C. P. WS. 8, 10 and 12, it is impossible to hold that the debtors were not acting as free agents in entering into this secret arrangement with one of their creditors. It strikes us as a clear act of fraud and collusion calculated to defeat the provisions of the insolvency law. We are unable to discover any motive whatever on the part of the insolvents, but that of giving a preference to the Appellants. Knowing that the insolvents were in embarrassed circumstances the Appellants took security for a past debt with no present advance or any promise of further advances in future so that the insolvents may carry on the business and get out of their difficulties The Appellants wanted to make their position secure and for that purpose agreed to keep the arrangement secret lest registration should invite publicity and pave the way for the insolvency of their debtors. It is the motive or object of the transferor that is material with respect to an application u/s 36. But in this cases the so called prior agreement is both (SIC) and fraudulent, which means or implies that both are at fault. According to the Court below and the Appellants by Ex. LXXV the debtore were only giving effect to a binding prior agreement. But in our view that agreement was by no means binding. It is only transfers given in performance of a prior valid agreement that would take the transfer beyond the purview or the mischief of the Insolvency law. See In re Jackson; Ex parte Hall, (1877) 4 Ch. D 682 at p. 684: (46 L. J. Bk. 39).

To hold that by a device like that resorted to by the prasent Appellants i. e. taking fresh bonds every three months with a view to evade the law regarding registration of documents, a creditor could successfully by pass the provisions of Section 36, Insolvency Act, would, in our opinion, be wrong and would also tend to encourage fraud.

Further, a prior agreement to give security is asked to be inferred from the conduct of the debtors in executing those bonds. No independent agreement is alleged or proved. Agreement, if any, had spent itself out with the execution of the first bond or with its renewals. Exhibit LXXV evidences a different arrangement or transaction altogether. It adds fresh properties as security and in place of the primary charge which the unregistered bonds gave the Appellants, over the properties included in them, Ex. LXXV gives only a subordinate charge regarding those properties. The Appellants knew Exs. I and II bad already come into existence and Ex. I showed full consideration was received therefore. According to the evidence, by the date of the execution of Ex. LXXV the debtors had received Rs. 55.000 out of the consideration for Ex. I. Keeping the whole of it to themselves when the debtors executed a new bond to the present Appellants charging more properties, it is difficult for us to think that the object of the debtors was anything other than to prefer the Appellants over other creditOrs.

An examination of decided cases shows that almost invariably transfers which are held valid pursuant to prior agreements are where the agreements are made contemporaneously with the advance of the loan or with the debtor incurring obligation in any other manner and not in cases similar to the present where the debtor transfers the whole or a substantial portion of his properties to a creditor for the purpose of securing payment of a past debt which act itself might or would constitute an act of'' insolvency. In the case in Sime, Darby & Co. Ltd. v. Official Assignee AIR 1928 P.C. 77 : (107 I. C. 233) the letters which the debtor passed to the creditor when the debts were incurred created a sort of lien on the goods purchased with the moneys advanced, or at any event, their Lordships were prepared to hold that the debtor honestly thought that those letters gave the creditor a charge over the goods. The same is the case in Thoma v. Joseph Panjikaran 10 T. L. J.146, already referred to. There the creditor stood surety for the debtor when the latter was brought under arrest in execution of a decree against him. The decree-debt was afterwards diacharged by the creditor and subsequently the debtor gave a hypothecation bond charging: his properties. That bond, it was that was sought to be annulled there. The creditor''s case was that there was an agreement to give such a bond even at the time be stood surety and that the bond was executed pursuant to that agreement. That case was found to be true and it was on that basis that the transfer impugned was held not to be one in fraud of creditOrs.

We shall in this context refer to Halsburys Laws of England (2nd Edn.) vol. II, para.20 at pp. 21 and 22. There it is stated thus:

An assignment by a debtor of the whole or substantially the whole of his property in consideration of a past debt is an act of bankruptcy within this provision of the law, whatever the motives of the parties may have been. This is not so, however, when the debt was an advance made upon the promise of the debtor to give security for it at a subsequent time; but the security must be a valid one and the promise absolute. The onus of proving the existence and bona fides of such a prior agreement is upon the person who sets it up. The fact that such prior agreement is unenforceable for want of a memorandum in writing as required by statute (Statute of Frauds) and that the debtor failed to set up the statute in answer to the claim of the lender for performance of the agreement will not invalidate the assignment. The giving of the security by the debtor must not in such cases be postponed for the purpose of preserving his credit. Such a postponement is evidence of an intention to prefer the grantee to the prejudice of creditors.

Among the cases relied upon in support of the view set out in the last sentence of the above extract reference may be made to two of them.

In Ex parte Burton; In re Tunstall, (1879) 13 Ch. D. 102 (41 L. T. 571), shortly before a trader filed a liquidation petition he executed a bill of sale of substantially the whole of his property, to secure th8 repayment of an advance which had been made to him two months previously. At the time when the advance was made the borrower agreed to give a bill of sale to secure it; but the agreement was that the bill of sale was not to be signed until the lender lost confidence in the borrower. The Court of Appeal held that the document could not be supported. In reversing the decision of Sir James Bacon C.J. in Bankruptcy, James L. J. said at pp. 108 to 109 of the report as follows:

There (referring to Ex parte Fisher In re Ash, (1878) 7 Ch. 636: (41 L. J. Bk. 62) we held that it is a fraud on the bankrupt law for a man to undertake to give his creditor a bill of sale when required, that is to say, when the circumstances of the debtor shall be such as to require the creditor to demand it. That decision established an exception upon an exception. That which is void is an assignment of all a man''s property for a past consideration. But a Court of Equity regards that which has been agreed to be done as done, and therefore it has been said that, it it was really part of the understanding when the money was advanced that a bill of sale should be given then that agreement would be the same thing as if the bill of sale had been actually given at the time. The bill of sale would be sustained by the previous agreement. But Ex parte Fisher, In re Ash, (1878) 7 ch. 636: (41 L. J. Bk. 62) established this exception upon that exception to the rule, viz.. that if the bargain be not an out and out one, but only an agreement to give the bill of sale when required, then it is only a device to enable the debtor to acquire false credit, and the creditor is not entitled to avail himself of it in the event of the debtor''s bankruptcy. It is a fraud on the bankrupt law. To my mind that is exactly the present case. The bill of sale was not to be signed till the borrower had lost the confidence'' of the lender. All the facts are consistent with this view, and are inconsistent with any other.

Baggallay L. J. agreed with the above view, but Thesiger L. J. (as he then was)-in concurring with the leading judgment added thus:

... The only question is whether, at the time when the advance was made, there was such an agreement to give the bill of sale as this Court can give effect to. The debtor''s evidence is that the bill of sale was not to be signed till Whitehead had lost confidence'' in him. If that evidence is not displaced it brings the case within the principle of Ex parte Fisher, In re Ash, (1878) 7 Ch. 636: (41 L. J. Bk. 62) which is not to be frittered away by nice distinctions, and the evidence of Whitehead admits something of the same kind, for he says that bill of sale was not actually signed till he had lost confidence in the debtor.

In the case before us there was no agreement at the time when advances were made or goods were sold and the agreement, when it came into being was that the bond should not be registered except as a last resort. It was to be kept renewed or substituted from time to time. In the case cited the signing of the bill of sale was itself postponed but here what is put off is the registration after it is executed.

In Ex parte Fisher, In re Ash, (1878) 7 Ch. 636: (41 L. J. Bk. 62), a trader applied to a creditor, who had previously advanced him �500 for a further advance of �100, which was accordingly made on the debtor giving a conditional promise that if he did not repay the �100 within ten days he would make an assignment of all his property to the creditor to secure both the past and fresh advance. Default was made in payment, and the assignment was executed. Shortly afterwards the debtor became bankrupt. Reversing the decision of the Chief Judge in Bankruptcy the appellate Judges held that the assignment was an act of bankruptcy and that it was void against the creditors. Certain extracts from the judgment Mellish L. J. gave in the appeal may usefully be quoted here. While referring to the argument that the agreement to give a bill of sale at the time when the fresh advance was made but a repetition of promises previously made the learned Lord Justice observed thus at p. 644:

Although we do not dispute the rule that where a sum of money is advanced on the faith of a promise that a bill of sale shall be given, such sum is to be treated as a present advance on the security of a bill of sale, we do not think this rule will protect transactions where the giving of the bill of sale is purposely postponed until the trader is in a state of insolvency in order to prevent the destruction of his credit, which would result from registering a bill of sale. We think that such a postponement is evidence of an intention to commit an actual fraud against the general creditors.

Again at p. 645 it is seen observed:

We are (SIC) that if we were to hold this bill of sale to be (SIC) should practically abrogate the rule that the assignment of the whole of a debtor''s effects in consideration of a past debt is an act of bankruptcy, and should in every case enable a favored creditor, who can trust his debtor to give him a bill of sale of all his property when required, to obtain payment of his debt in full to the prejudice of the other creditors.

Another case reported in the same volume can also usefully be referred to here. In Ex parte Cohen; In re Sparke, (1878) 7 Ch. 20: (41 L.J. Bk. 17) with respect to two bills of sale given to a creditor by a debtor there was an agreement between them that the bills of sale were from time to time to be renewed so as to render it not necessary to register them. The bills were accordingly renewed every nineteen days, and this was done three times. The debtor then he came bankrupt and it was held that the last bills of sale were invalid, as constituting an act of bankruptcy. In confirming the decision of the Chief Judge in Bankruptcy James L. J. said:

It is an established principle in bankruptcy that an assignment of all the goods of a trader by way of security for a past debt is not a valid assignment. Hare I find an assignment of all the goods and stock-In-trace of the debtor, which on the face of it purports to be made in consideration of two sums of �27-10s. each, advanced immediately before the execution of the deed. There was, in fact, not one farthing advanced on that day to the debtor. It appears to me that this was an act of bankruptcy, as it must necessarily have the effect of defeating and delaying the creditors. Then it was said that though the security was for a past debt, it could be supported by reason of a prior agreement made between the parties. But that agreement was evidently conceited for the purpose of evading, if possible, the remedy which the Act as to bills of sale intended to provide for the benefit of creditors. This attempt at fraud does not, in my opinion, strengthen the position of those who rely upon it to support the assignment. To hold that such an assignment could stand, would be a direct encouragement to fraud.

A passage from Mellish L. J.''s judgment also may be quoted here:

...... I think that this does not come within the cases cited, where a bill of sale is upon an advance agreed to be given, and is afterwards given, in which ease it has been held to relate back to the time of the advance In all those eases the agreement to give the bills of sale was binding on the debtor for the benefit of the creditor; but it is obvious that this debtor did not agree to give a fresh bill of sale for the benefit of the creditor. On the contrary, it is a device between them for the benefit of the debtor, to enable him to avoid that registration which the Act of Parliament has required. Such a consideration ought not to prevent the application of the ordinary rule that a conveyance of all a man''s property for a past debt is an act of bankruptcy. On the contrary, it aggravates the case, as indicating actual fraud. In the face of these authorities. it is in our opinion idle to contend that Ex. LXXV should be taken to be a valid conveyance because it was executed pursuant to a prior agreement. In the last mentioned case the last two bills were registered after the presentation of the petition for liquidation and all three Courts held the documents to be invalid and void as against the trustee under the liquidation. Had the present Appellants got their third bond registered similar fate would have overtaken it and their position cannot be any the better because they took a fresh bond. It has only worsened the position; because it is after Exs. I and II and it embraces more properties.

What Mellish L. J. refers to in Ex parte Cochen; In re Sparke, (1878) 7 ch. 20: (41 L. J. Bk.-17) as the ordinary rule is well illustrated by the decision in In re Jukes, Ex parte Official Receiver, (1902) 2 K. B. 58: (71 L. J. K. B. 710) where it was held that:

A creditor who takes a transfer of substantially the whole of the property of his debtor In payment of a past debt, with notice that there are other creditors, cannot be said to be acting in good faith, and is therefore not entitled to the protection of Section 49, Bankruptcy Act, 1.883; and such a transaction is an act of bankruptcy and prima facie a fraudulent preference on the part of the debtor.

The case that Ex. LXXV was got executed through pressure and threat of legal proceeding has next to be considered. We may at once state that there is no evidence regarding it except the interested testimony of C.P.W. 12 and the testimony of C. P. Ws. 8 and 10, of whom we have already said that they are out to help by their evidence the present Appellants. Exhibit LXXV is silent with regard to any pressure or threat of any proceeding, civil or criminal. Nor does it refer to any prior agreement or the execution of the unregistered bonds. We were not told what the threat regarding the criminal prosecution was. Presumably it was about the alleged nonreturn of the three unregistered bonds. We are, however, unable to accept the version that the Appellants parted with them on the request of the debtors or that the debtors gave them to the mortgagee under Ex. I. It is extremely unlikely that the Appellants would have parted with the bonds without obtaining a receipt, but that is what C.P. w. 12 wants us to believe. The debtors say they did not ask the mortgagee to give them a receipt. What C. P. W. 10 stated about it was that he handed over the three unregistered bonds to C. P. W. 1, but neither the latter nor his brother C.P. W. 2 was asked anything about it. C. P. W. 1 was examined in 1106 and his brother C. P.W. 2 in 1107. Their father the mortgagee was examined in 1108 and it was only then that the suggestion is made for the first time whether the debtors bad not banded over to him the unregistered bonds they executed in favour of the present Appellants. He stoutly repudiated it. C. P. W. 12 admits he did not issue any registered notice to the debtors demanding the return of these bonds. In these circumstances we have no hesitation to hold that the story that the three unregistered bonds were given by THE Appellants to the debtors and that the latter gave them to the mortgagee under Ex. I is a mere myth. With it must fail the case that Ex.LXXV happened to be executed under pressure AS no other form of pressure or threat was sought to be pressed into service. We cannot, therefore, and our way to hold that there was any real or bona fide pressure. It is all mere sham.

Be that as it may, we shall, however, assume that there was pressure and examine whether any pressure as alleged would be of any avail to the Appellants to sustain the validity of the document in their favour. When Ex. LXXV was executed the debtors must themselves have realised that their future was doomed and that sooner or later they will have to face the insolvency Court. To add to their inability to pay their debts out of their own money there was the fact that EXS. I and II had already come into existence and the debtors had with them Rs. 55,000 out of the consideration therefore. When they did not intend to use that money or any portion thereof to discharge their debts their insolvency was inevitable and we can unhesitatingly say, they themselves had realised it. It is settled law that a threat of legal proceeding to a person in hopelessly involved condition is no genuine pres. sure at all, so as to make a transfer, which otherwise appears fraudulent, a bona fide transffer. See Kirpa Ram v. Official Receiver AIR 1940 Lab. 6. This follows an earlier decision of the same Court reported in Narisingh Das v. Official Receiver AIR 1937 Lah. 68 : (169 I. C. 845). It would appear the two cases arose out of the same insolvency. The latter case refers to two English cases namely, Ex parte Hall; In re Cooper, (1882) 19 D. 580 : (51 L J. Ch. 556) and Ex parte Wheatley, In re Grimes, (1881) 45 L. T. 80. The decision in Official Receiver, Trivandrum v. Nallaperumal Pillai 1945 T. L. R. 465, takes the same view as the Lahore High Court took in the cases referred to above and follows Ex parte Hall; In re cooper, (1882) 19 Ch. D. 580: (51 L. J. Ch 556) and another English case reported in In re Ramsay; Ex parte Deacon, (1913) 2 K. B. 80: (82 L, J. K. B. 526) in support of the view that pressure by the creditor as a defence to an allegation of preference must be an effective and bona fide pressure. Krishnaswami Aiyar C.J. quoted the following extract occurring at p. 585 of the judgment of Jessel M. R. in Ex prte Hall; In reCooper, (1882) 19 Ch.D. 580: (51 L.J. Ch 556):

It appears to me that it would be absurd to call it pressure. A man says to his credltor, I am about to become bankrupt, or I shall stop payment In a week". The creditor says ''pay me my debt, or I will sue you for it.'' Can that be called bona fide pressure by the creditor? When you consider the matter, It sems to me that it would be absurd so to call it. And that is exactly what occurred in the present case. Of course, it would be an entirely different matter if the creditor did not know of the state of his debtor''s affairs.

In the present case the correspondence between the parties together with the Appellants'' conduct in keeping the bonds executed to them unregistered and the further fact of their knowledge of the existence of EXS. I and II leave no room for doubt that when they got Ex. LXXV executed the Appellants had full knowledge of the state of affairs of the debtors.

In 1945 T. L. R. 466, the learned Chief Justice also quotes from the decision of Phllli more J. (as he then was) in In re Ramsay; Ex parte Deacon, (1913) 2 K. B. 80: (82 L.J . K. B. 526). If we may say so with respect that extract embodies a very clear summary of the law relating to fraudulent preferences. The extract reads:

In my opinion this Is a question of fact which, of course, must be approached with a proper view of the law, I assume the proper view of the law to be that to constitute a fraudulent preference the debtor must be insolvent to his knowledge and the transaction must be within the statutory period, and the court must be satisfied that the dominant or substantial motive was to prefer the creditor, and was not to obtain some advantage to the debtor, or rather to get rid of the negative expression, that there was no substantial advantage to the debtor likely to accrue by reason of the act of preference, no escape from criminal prosecution, no escape from being declared, whether criminally or not, a trustee who had failed in his trust, No. advantage which would enable him to keep afloat and carry on his business; and although in some cases a writ may be pressure, there are cases where writs are of absolutely no importance to the debtor, no terror; and in such cases I do not think that the threat of a writ, or the issuing of a writ, ought to be called prossure.

A decision by Patanjali Sastri J., reported in Vempati Venkayya Vs. The Official Receiver, may also use, fully be cited in thi8 context, The relevant portion of the head, note to that case reads as follows:

The insolvent''s financial condition was so hopeless that any threat or pressure of the creditors could have bad no influence on him. The creditors knew of such condition and wore demanding payment. For some reason which had not been affirmatively established, the insolvent sold most of his properties to one of the creditors in partial discharge of the debt due to him and the sale had the effect of giving him a preference over his other creditors:

Held, that an intention to prefer the transferee over other creditors could properly be inferred in the circumstances of the case in the absence of any reason why the insolvent sold practically all his properties to the transferee when his insolvency was imminent.

The law or the facts of the case are not therefore, helpful to sustain the lower Court''s view that Ex. LXXV was executed on account of pressure and threat of legal proceeding. We accordingly differ from that view.

As the result of the foregoing discussion it follows that EX. LXXV constitutes a fraudulent preference and we bold the same to be void as against the receiver. The decision annulling Ex.LX Xv is, therefore, confirmed though for reasons different from that found by the learned Iudge.

The Official Receiver''s application contained a bare statement of the factum of the execution of these documents and that they are liable to be annulled. No further facts are set out at all. The alionees who sought to defend the respective transfers in their favour would seem to have filed no counter statements. We were not referred to any such counter statement nor wore we able to find one ourselves in the voluminous records of the case. We desire to point out that in an enquiry held with respect to an Official Receiver''s application to annul transfers made by insolvents the receiver and the parties are expected to disclose their respective cases in their pleadings and the Court should hold the trial in the same manner as regular original suit is tried. An Allahabad decision reported in Chunnoo Lal Vs. Lachman Sonar and Bhawani Shankar, emphasises this aspect very clearly. The head-note to that case sets out this view in the following terms:

Where a receiver in insolvency seeks to have Bet aside, under the provisions of Section 36 of the Provincial Insolvency Act, 1907, a transfer made by the insolvent ho should file a written statement (similar to a plaint in ordinary, suit) setting forth the grounds on which "the transfer is challenged, the transferee should put in a written reply, and the proceeding should continue very much as in a suit. Such matters should not and cannot properly be disposed of in a summary manner.

The observations of Coutts Trotter J., as he then was, made in the Official Assignee of Madras v. O. R. M. O. R. S. Firm 50 Mad. 541 : AIR 1927 Mad. 526 about pleadings in each cases may with advantage be quoted here:

It may, to begin with, be observed that however summary such proceedings in insolvency may be and we might indeed say, because the proceedings are summary, it is incumbent on the Official Assignee making such applications to set out the exact grounds or cause of action properly and definitely so as to give sufficient notice thereof to the other side. However much the vagueness of pleading by or on behalf of the lay (SIC) may be regarded as excusable, no similar reasons are available in the case of a law officer of the Crown like the Official Assignee.

Further, though we have on the materials before us given a decision in favour of the Official Receiver, we cannot help thinking the receiver could have proved more helpful to the Court by placing all available materials in a more compact form.

Another matter which we wish to advert to is that the receiver should have made two independent applications to annul the two transfers impugned in this case. Except when the alienations are the outcome of a scheme of fraud and conspiracy between the insolvent on the one hand and the alienees on the other a joint application or joint trial is not the proper procedure to be adopted. See In Re: Binjraj Harnandrai, , Official Assignee Vs. R. Krishnaswami Naidu and Others, and Kullappa Reddiar and Others Vs. Al. Vr. St. Veerappa Chettiar and Others,

Finally we desire to point out to the lower Court that it should spare no pains to wind up the administration of the estate of the insolvents as expeditiously as possible. The petition giving rise to these appeals filed in Meenon 1103 was disposed of only in Thulam 1120 and the appeals have been pending before the High Court for very nearly six years. During the course of the arguments before us the learned Counsel appearing for the varioua creditors (including the alienees creditors under Exs. I and LXXV) told us that the creditors would all very much welcome any action taken by the Receiver to sell the properties comprised in the estate free of all incumbrances and that in their opinion the interest of all creditors, secured or unsecured, would be amply protected by the Receiver holding the sale proceeds to be dealt with according to the final decision regarding the validity or otherwise of the impugned transfers. There should, therefore, be no difficulty for the Receiver to expedite the winding up of the estate without losing further time.

As a result of the conclusions we have arrived at in this judgment both the appeals fail and we dismiss them with cots to the Official Receiver. The Appellants in both the appeals as also the other creditors who bad entered appearance in these appeals will bear their respective costs.