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Abdul Jabbar and anr. Vs. B. Onkar Nath - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1936All489
AppellantAbdul Jabbar and anr.
RespondentB. Onkar Nath
Excerpt:
- - it is perfectly clear that the additional district judge merely got rid of the case without the least attempt to approach the merits of it. on these facts, we are clearly of opinion that the case is one in which the insolvents transferred practically the whole of their immoveable property with a view to giving preference to one of their creditors over the others. it was also contended that unless it is proved that the insolvents voluntarily gave preference to one of the creditors over the others, and if the creditor had refused to make a fresh advance without security for the previous loan as well as for the fresh advance, section 54 cannot apply......ram and ganesh ram being declared insolvents. on 26th july 1930 the aforesaid persons were adjudged insolvents. mr. onkar nath srivastava, a local pleader, was appointed receiver. on 11th october 1930 the receiver applied, under section 54, prov. insol. act, for annulment of the aforementioned mortgage on the allegation that the insolvents had made it with a view to giving preference to one of their creditors, namely the mortgagees. the mortgagees contested the application, alleging that the object of the mortgage-deed was not to give them preference over the other creditors, but that it was in the ordinary course of business that the transaction was entered into. after protracted proceedings the subordinate judge held that nothing was due to gopi ram and ratan ram and nothing was.....
Judgment:

Niamatullah, J.

1. This purports to be an application for revision under Section 115, Civil P.C., but it is really one under Section 75, Provincial Insolvency Act. The scope of a revision under the latter is much wider than that under the former. If the judgment of the Additional District Judge, who heard an appeal from the decision of the Court of first instance (Subordinate Judge, Ballia), had not been vitiated by the fact that he did not apply his mind to the merits of the case at all, our task would have been simpler. Sheo Ram, Jamuna Ram and Ganesh Ram were the members of a firm styled Gauri Ram, Mahadeo Ram, carrying on business at Rasra, District Ballia. They were dealers in grain and had transactions with a number of local firms. It is no longer in dispute that they were indebted to a number of creditors, including the applicants, Abdul Jabbar and Abdus Sattar, and to one Gauri Shanker, a member of the firm styled Gauri Shanker, Hira Lal. It is also not in dispute that a sum of Rs. 880-10-3 was due to Abdul Jabbar and Abdus Sattar on 28th March 1930, when Sheo Ram, Jamuna Ram and Ganesh Ram executed a deed of mortgage, hypothecating their shop and other house-property in Rasra in lieu of Rs. 4,500, which, as stated in the mortgage-deed. was made up of the following four items:

(1) Rs. 880-10-3, due to the mortgagees; (2) Rs. 1,592-1-0 left with the mortgagees for payment to Gopi Ram;(3) Rs. 1,310-4-9, left with the mortgagees for payment to Satan Ram and (4) Rs. 717 cash advanced by the mortgagees to the mortgagors. On 11th July, 1930, Gauri Shanker, one of the creditors, made an application for Sheo Ram, Jamuna Ram and Ganesh Ram being declared insolvents. On 26th July 1930 the aforesaid persons were adjudged insolvents. Mr. Onkar Nath Srivastava, a local pleader, was appointed receiver. On 11th October 1930 the receiver applied, under Section 54, Prov. Insol. Act, for annulment of the aforementioned mortgage on the allegation that the insolvents had made it with a view to giving preference to one of their creditors, namely the mortgagees. The mortgagees contested the application, alleging that the object of the mortgage-deed was not to give them preference over the other creditors, but that it was in the ordinary course of business that the transaction was entered into. After protracted proceedings the Subordinate Judge held that nothing was due to Gopi Ram and Ratan Ram and nothing was paid to them, and that the sum of Rs. 717, mentioned in the mortgage-deed as a cash advance, was returned to the mortgagees after the same had been paid by them to the mortgagors before the Sub-Registrar at the time of the registration of the deed. He held, in conclusion, that the object of the mortgagors in executing the mortgage-deed was to give preference to Abdul Jabbar and Abdus Sattar over the other creditors. On that finding he annulled the mortgage under Section 54, Insolvency Act.

2. An appeal was preferred in the Court of the Additional District Judge, Mr. S. Maitra, who has since retired. The progress of the appeal was extremely unsatisfactory. The appeal was filed on 30th November 1931, and after nine adjournments was heard on 29th April 1933, when judgment was reserved. No notice of the case was taken till 1st February 1934, when the Court recorded an order that further arguments would be heard on 17th February 1934. The appeal was adjourned on the last date. By 30th July 1934, when Mr. Maitra was transferred to Meerut, no hearing took place. He disposed of the appeal on 28th August 1934 without hearing further arguments. As was to be expected, the judgment is extremely sketchy. None of the questions arising in the case, and decided by the first Court, was discussed. It is perfectly clear that the Additional District Judge merely got rid of the case without the least attempt to approach the merits of it. When the revision was opened before us and the history of the appeal disclosed, we had no hesitation in holding that the judgment of the appellate Court was no judgment in law, and that the case should either be sent back to the appellate Court for a re-hearing or we should hear the case on the facts. We decided upon the latter course in view of undue delay having already occurred in disposing of a case of this kind.

3. The case of the Receiver is that there was a conspiracy between the insolvents and the applicants with a view to giving preference to the latter and defeating the claims of the other creditors, and that the consideration of the mortgage was fictitious, except to the extent of Rupees 880-10-3, which was due to the mortgagees on the date of the mortgage. It is said that the sum of Rs. 717, which was paid at the time of registration, was returned to the mortgagees, and the sums of Rs. 1,592-1-0 and Rs. 1,310-4-9, left with the mortgagees for payment to Gopi Ram and Ratan Ram to whom they were, in fact, not due, were never paid. Direct evidence was adduced by the Receiver to prove the conspiracy and the fictitious character of the major part of the consideration as mentioned above. The learned Subordinate Judge has believed the evidence. We have been taken through the statements of the witnesses examined by the Receiver on this part of the case, and are unable to agree with the learned Subordinate Judge in some respects. (After considering the evidence their Lordships proceeded): Considering the entire evidence, we have arrived at the conclusion that the consideration of the mortgage, so far as the sums of Rs. 1,592-1.0 and Rs. 1,310-4-9 left for payment to Gopi Ram and Ratan Ram, respectively, are concerned, was not due to them and was not paid, and that the real consideration of the deed consisted of two sums of Rs. 880-10.0 and Rs. 717 paid before the Sub-Registrar. The value of the mortgaged property, as stated by Dasrath, the witness produced by the mortgagees, is between Rs. 6,000 and Rs. 7,000; but, according to the witness Khuda Bakhsh, examined by the Receiver, it is Rs. 4,600. Making allowance for exaggeration on one side and undervaluation on the other, we think that the value is between Rs. 5,000 and Rs. 5,500.

4. We are unable to believe that Abdul Jabbar and Abdus Sattar could have agreed to advance as much as Rs. 4,500 at 9 per cent per annum, compoundable every year, on the security of property of that value. We think that there was collusion between the mortgagors and the mortgagees with a view to saving as much as possible for the mortgagors who were believed to be in an em. barrassed financial position and were expected to go to the Insolvency Court and long afterwards. It seems to us that, the mortgagers, on the one hand agreed to give preference to Abdul Jubbar and Abdus Sattar in respect of what was due to them, if they agreed to advance a further sum of Rs. 717. Abdul Jubbar and Abdus Sattar, on the other hand, agreed to advance Rs. 717, provided the sum previously due to them together with the fresh advance was secured on the house property. It was also part of the understanding that two fictitious amounts should be part of the consideration, so that the total amount of the mortgage-money be nearly equal to the value of the property, and the other creditors may not be able to recover their debts to any appreciable extent by sale of the equity of redemption. On these facts, we are clearly of opinion that the case is one in which the insolvents transferred practically the whole of their immoveable property with a view to giving preference to one of their creditors over the others. It was argued that the cash advance, made by the mortgagees, takes the case out of the purview of Section 54, Provincial Insolvency Act, and that the case is one in which the insolvents needed more money to carry on their business, and one of the creditors made a fresh advance, taking a mortgage of the insolvents' property in respect of the consolidated amount due to them. It was also contended that unless it is proved that the insolvents voluntarily gave preference to one of the creditors over the others, and if the creditor had refused to make a fresh advance without security for the previous loan as well as for the fresh advance, Section 54 cannot apply. We do not think this contention is sound in the circumstances of this case. If the object of the insolvents is to give undue preference to one of their creditors in consideration of a fresh advance, the fact that the mortgagees were able to persuade the insolvents to give such preference will not affect the matter. We hold that Section 54 applies to the case. The result is that the order of the Subordinate Judge annulling the mortgage-deed, dated 28th March 1930, is upheld, but in modification of his order we declare that the applicants shall be entitled to become scheduled creditors not only in respect of Rs. 880-10-3, as directed by the Subordinate Judge, but also in respect of Rs. 717, advanced in cash on the date of mortgage.

5. The order of the Subordinate Judge as regards . costs also requires to be corrected. The receiver is a legal practitioner who conducted his own case. The learned Subordinate Judge directed that Rs. 56-4-0, legal fees, be taxed as costs, even though the receiver did not pay this sum to any legal practitioner. The order is based on the view that the receiver had to discharge not only the duties of a receiver, but also those of a legal practitioner, who could have been engaged but was dispensed with because of the fact that the receiver happened to be a legal practitioner. We do not think that a legal practitioner's fee can be taxed, as ordered by the learned Subordinate Judge. According to the rules, only such sum can be taxed as legal practitioner's fee as has been actually paid and certified by the legal practitioner to whom it has been paid. These conditions are not fulfilled in the present case. As both parties have partially succeeded, we order that they shall pay their own costs in both Courts.


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