Official Receiver vs Muhammad Meera Sahib and Another

Vardachariar, J.—In this case I am asked, u/s 75, Provincial Insolvency Act, to set aside the decision of the Courts below which upheld a

mortgage (Ex. 1) in favour of respondent No. 2. The circumstances of the case clearly invite scrutiny; but, after an investigation, both the Courts

have held that the transaction was not the result of a desire or intention on the part of the insolvent to prefer respondent No. 2 but the result of

pressure from the cerditor and also of a desire on the part of the insolvent to secure a certain benefit to himself. I do not find myself in a position to

say that this concurrent finding is vitiated by any underlying error of law or misdirection.

Exhibit 1 was put through in a form, not always adopted, in that it was executed not directly by the insolvent but by respondent No. 1 to whom

the insolvent by a document of even date purported to sell the last part of his property, making it part of the consideration for the sale that the

transferee should pay one of the debts due from the insolvent to respondent No. 2. There can be little doubt that a sum of Rs. 1,000 at least was

due from the insolvent to respondent No. 2 and probably another sum of Rs. 700 was also due to her under two other transactions. I see no

reason to doubt the correctness of the finding that pressure and indeed genuine pressure was brought to bear on the insolvent on behalf of

respondent No. 2. It has no doubt been held that in certain circumstances, the pressure from the creditor may be feigned or purposeless, and in

such cases, the mere appearance of pressure will not prevent a transaction being a fraudulent preference. But I have no reason to think that in this

case that was the situation. Whether the insolvent was at the time of that transaction actually in insolvent circumstances or not, it does not appear

that he or his creditors thought that the insolvency was inevitable. This is shown by the fact that respondent No. 2 herself flied a suit against him,

subsequent to the date of Ex. 1, on another promissory note and other creditors of the insolvent also instituted suits and applied for attachment

before judgment. It is in this connection that the method adopted by the insolvent is also of some significance. He purported to transfer most of his

properties to respondent No. 1 for a sum of Rs. 2,500 and both the Courts have found that the object of this transaction was to enable the

insolvent to secrete at least a sum of Rs. 900 or portions of the property worth that amount, for his own advantage. Considering these facts in the

light of the rule that where an insolvent does an act not mainly with a view to prefer a creditor but with a view to securing some real or fancied

advantage to himself, the transaction will not be set aside on the ground of fraudulent preference though in fact it may amount to a preference, I

think the Courts below were justified in coming to the conclusion that the two documents must be looked upon as part of one and the same

transaction and that so far as the mortgage which the insolvent got executed by respondent No. 1 in respondent No. 2''s favour is concerned, it

was the result of pressure and that the insolvent''s purpose in going through this S6t of transactions was to secure, if possible, some advantage to

himself.

In some of the cases cited, it has no doubt happened that the advantage was obtained by payment of additional cash, by the preferred creditor

himself: cf. T.S. Ramaswami Iyengar, Official Receiver of Madura Vs. Chinnathambi Kone, and Mundluru Gangappa Vs. Official Receiver, . But

this, I think, is not a part of the rule itself, but only a matter of detail. In In re Arnott:. Ex parte Bernard (1889) 6 M 215 the arrangement between

the insolvent and the preferred creditor was that the preferred creditor should raise from elsewhere a sum of money on the security of the property

and give it to the debtor. This was considered by Cave, J. to be sufficient to bring the case within the rule that the dominant object of the insolvent

was to secure his own benefit. I may also add that the circumstance that in most of the reported cases the insolvent did in fact succeed in getting

the extra advantage whereas in the present case, he has failed to secure it, ought not to make a difference in the rule of law. Here again the decision

in In re Arnott; Ex parte Bernard (1889) 6 M 215 is itself a relevant authority because it happened in that case that the extra loan of �250

stipulated was in fact not paid over by the solicitor to the insolvent before the act of bankruptcy was committed and was ultimately directed by the

Court to be paid into the hands of the Receiver.

In the above view, it is unnecessary to consider whether in the circumstances of the present case it will be possible to treat respondent No. 2 as a

bona fide transferee for value from one who took a transfer which is itself voidable u/s 53, Provincial Insolvency Act. Though there is no Clause to

be found in Section 53 corresponding to Clause 2 of Section 54, the reason for the difference has been explained in Ex parte Broun; In re

Vansittart (1893) 2 Q.B. 377 : 62 L.J.Q.B. 279 : 5 R. 280 : 68 L.T. 233 : 51 W.R. 286 : 10 Morrell 44 and following that decision, it has been

held in several cases that a second transferee who bona fide takes a transfer for value from one whose transfer offends Section 53, may invoke the

protection of the equitable rule in favour of transferees for value without notice: see In re Brail; Ex parte Norton (1893) 2 Q.B. 381 : 62 L.J.Q.B.

457 : 5 R. 440 : 69 L.T. 323 : 41 W.R. 623 : 10 Morrell 166, In re Carter and Kenderdine''s Contract (1897) 1 Ch. 776 : 66 L.J. Ch. 408 : 76

L.T. 476 : 45 W.R. 484 : 4 Manson 34, In re Hart; Ex parte Green (1912) 2 K.B. 6 : 81 L.J.K.B. 1213 : 107 L.T. 368 : 19 Manson 334 : 56

S.J. 615 : 28 T.L.R. 482 and Amir Ahmad Vs. Syed Hasan, . It is possible in view of the observations in Ex parte Brown; In re Vansittart (1893)

2 Q.B. 377 : 62 L.J.Q.B. 279 : 5 R. 280 : 68 L.T. 233 : 51 W.R. 286 : 10 M 44 that this principle can be invoked only by a person who has

parted with consideration subsequent to the date of the transfer by the insolvent to the intermediate transferee! but it is unnecessary to pursue that

question in the present case. The revision petition fails and is dismissed with costs of respondent No. 2.