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O.M. Chiene Vs. Kishun Prasad - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1935All982; 159Ind.Cas.616
AppellantO.M. Chiene
RespondentKishun Prasad
Excerpt:
.....that the insolvent acquired certain property before his insolvency, but acquired it in the name of somebody else. in these circumstances, the insolvency court held and was indeed bound to hold in the absence of any evidence to the contrary that the transaction relating to this property did really and in fact take place between babu lal and badri prasad and that kishen prasad's name was merely introduced into the transaction for convenience or for reasons best known to badri prasad himself. his very silence in these circumstances strongly suggests that he was well aware that the whole of this transaction was fraudulent and bogus. upon the evidence i am satisfied that this was a fraudulent transaction and must be set aside......district judge of allahabad, setting aside an order of the insolvency court declaring a certain sale-deed, dated 1st november 1929, standing in the name of the respondent, kishen prasad null and void.2. the facts of the case can be shortly stated as follows : one badri prasad applied on 18th november 1929, to be adjudged an insolvent, and was so adjudged on 16th may 1930. many years before this insolvency badri prasad had transferred certain of his property to his relations. on 22nd september 1924 he had mortgaged part of his property in favour of sundar lal, and on 11th may 1925, he had ostensibly sold some of his property to kunj behari lal. it is to be observed that after this insolvency the official receiver moved to set aside both these transfers as being fraudulent, and the.....
Judgment:

Harries, J.

1. This is a second appeal from an order of the learned District Judge of Allahabad, setting aside an order of the Insolvency Court declaring a certain sale-deed, dated 1st November 1929, standing in the name of the respondent, Kishen Prasad null and void.

2. The facts of the case can be shortly stated as follows : One Badri Prasad applied on 18th November 1929, to be adjudged an insolvent, and was so adjudged on 16th May 1930. Many years before this insolvency Badri Prasad had transferred certain of his property to his relations. On 22nd September 1924 he had mortgaged part of his property in favour of Sundar Lal, and on 11th May 1925, he had ostensibly sold some of his property to Kunj Behari Lal. It is to be observed that after this insolvency the Official Receiver moved to set aside both these transfers as being fraudulent, and the Insolvency Court has set them aside, and that decision has been confirmed by the learned District Judge.

3. These two transactions show that long before the actual insolvency Badri Prasad was disposing of his property amongst his relations with a view to defeating his creditors. It appears that sometime before October 1929, Badri Prasad had entered into an agreement with one Babu Lal to purchase certain property. Babu Lal, for some reason or another, refused to transfer his property; and in consequence a suit was instituted by Badri Prasad, in the Court of the Munsif of Kundia, Partabgarh, claiming specific performance of the contract. On 1st October 1929, a compromise was effected between Badri Prasad and Babu Lal, and this compromise was in due course decreed. As a result of the compromise, a sale-deed of this property was executed on 1st November 1929, by Babu Lal in favour not of Badri Prasad, but of his son-in-law, Kishen Prasad. It is the allegation of the Official Receiver that the real purchaser of the property was Badri Prasad, and that the name of Kishen Prasad was menely inserted in the sale-deed in order to defeat creditors. It is clear that at the date of the compromise and the date of the sale-deed Badri Prasad must have been contemplating insolvency, because within 17 days of the date of the sale-deed he actually made an application to be adjudged an insolvent. It is impossible for me to believe that the causes of this insolvency occurred within a few days of his application. Two earlier transactions, which have been set aside as being fraudulent, show that Badri Prasad had been preparing for this insolvency for some years.

4. The matter does not rest there, because on 21st January 1931, part of the property, the subject-matter of the sale-deed of 1st November 1929, is again dealt with by Badri Prasad. On this latter date a sale-deed was executed by Badri Prasad in favour of Tulshi Ram, but in that sale-deed Badri Prasiad describes himself as the general attorney of Kishan Prasad. However it appears that in this sale-deed he gives a personal covenant rendering him liable in certain event. Upon an application to the Insolvency Court to declare that the sale-deed, dated 1st November 1929, was void and that the real owner of the property was Badri Prasad, the Insolvency Court made such a declaration. On appeal however the learned District Judge reversed the decision of the Insolvency Court, and this apparently upon two grounds.

5. It is first pointed out by the learned District Judge that the sale-deed in question was not filed, and therefore the Court could not make an order setting it aside. It is quite clear that the Official Receiver was not in a position to file the original sale-deed, because it would naturally be in the possession of Kishen Prasad. Notice was given to the latter to produce this document; but apparently this was not done. An affidavit, sworn by the Official Receiver, setting out all the facts relating to this transaction was before the Court; and as the existence of this deed was never challenged, it was quite, open to the Court to set it aside in the circumstances. The learned District Judge did not decide the case upon this point, and in my view the fact that a sale-deed was not filed cannot affect the ultimate decision of the case.

6. In the second place, the learned Judge was of opinion that, as this case did not fall within the purview of Section 53, Provincial Insolvency Act, the order of the Insolvency Court was wrong and would have to be set aside. Quite clearly this is not a case within the purview of Section 53, Provincial Insolvency Act, because the allegation here is not that the insolvent has transferred property, but that the insolvent acquired certain property before his insolvency, but acquired it in the name of somebody else. In my view, Section 53, Provincial Insolvency Act, does not affect this case at all.

7. The unrebutted evidence led by the Official Receiver establishes that Badri Prasad had entered into a contract with Babu Lal to purchase the property in question. It further establishes that, upon a suit being instituted by Badri Prasad, a compromise was entered into and that, as a result of this compromise, the property was transferred to Kishen Prasad, who was Badri Praisad's son-in-law. Before the Insolvency Court, Babu Lal's general agent was called, who made it abundantly clear that the original contract was between Babu Lal and Badri Prasad and that it was Badri Prasad who brought proceedings to enforce his contract. He further stated on oath that it was Badri Prasad who provided the consideration for this sale-deed. In these circumstances, the Insolvency Court held and was indeed bound to hold in the absence of any evidence to the contrary that the transaction relating to this property did really and in fact take place between Babu Lal and Badri Prasad and that Kishen Prasad's name was merely introduced into the transaction for convenience or for reasons best known to Badri Prasad himself. This general agent did suggest that Kishen Prasad's name was being used, because Badri Prasiad was then in a difficulty. Badri Prasad must have been in financial difficulty at the date of this transaction, because, as I have said previously, 17 days later be made an application to be adjudged an insolvent. That was the evidence before the Court on behalf of the Official Receiver and it is to be observed that neither Badri Prasad nor Kishen Prasad who were parties to the proceedings, gave evidence to rebut these allegations.

8. It must have been quite clear to them that there was an allegation that Badri Prasad was fraudulently using his son-in-law's name and that the latter was permitting his name to be used in order to defraud creditors. In these circumstances one would have expected Kishen Prasad to have gone into the witness box and denied these statements, if they were untrue. His very silence in these circumstances strongly suggests that he was well aware that the whole of this transaction was fraudulent and bogus. It has now been argued on behalf of Kishen Prasad that Badri Prasad was at the date of this suit and compromise the general agent for Kishen Prasad and that he brought the suit and entered into the compromise as such agent. It is further said that Badri Prasad paid the money in his capacity as agent and in 1931 dealt with the property again in the same capacity. It is to be observed that there was no evidence at all before the Court that Badri Prasad acted in any such capacity. The unrebutted evidence was that Badri Prasad had entered into the original contract, brought the suit, compromised the suit and provided the money. Having regard to the fact that there was no evidence to the contrary, the Insolvency Court was bound to hold that Badri Prasad was the real owner of this property and that Kishen Prasad's name was merely put forward as a blind to defeat possible creditors or decree-holders.

9. When the case is approached from this point of view, it is clear that Section 53, Provincial Insolvency Act, has no application and that this is a case where the Court can go into the facts and ascertain the true ownership of this property under the powers conferred by Section 4, Provincial Insolvency Act. In my judgment, the Insolvency Court was right in declaring that the sale-deed of 1st November 1929, did not correctly represent what had, in fact, occurred, and further was right in declaring that the property in question, though standing in the name of Kishen Prasad, was property which had vested in the Official Receiver and which could be distributed amongst the creditors.

10. I have been in some doubt as to whether I should remit this case to the learned District Judge for a finding of fact upon this sale-deed of 1st November 1929. The learned District Judge having considered the matter only from the point of view of Section 53, Provincial Insolvency Act, has not considered the questions of fact. However the record is before me, and the evidence dealing with this particular transaction has been read. As I have pointed out, the evidence of an independent witness, that is, the general agent of the vendor, makes it clear that Badri Prasad was the person who was acquiring this property and was the person who paid for it. Where the evidence upon the record is complete, it is open to this Court to find a fact where the lower appellate Court has not done so. In my view, the evidence in this case is all one way and has not been rebutted by the persons who were in a position to do so. If I remitted this case for a finding as to the genuineness of the sale-deed of 1st November 1929, the learned District Judge would be bound to hold upon the evidence that the transaction was a fictitious one and that the real purchaser was Badri Prasad. That being so, I do not propose to remit this case, but I find as a fact upon the evidence, and particularly upon the evidence of the general agent of the seller, that Badri Prasad did in his personal capacity compromise the suit and acquire the property and that the name of Kishen Prasad was only introduced in order to hide the true nature of the transaction. Upon the evidence I am satisfied that this was a fraudulent transaction and must be set aside.

11. In the result therefore I allow this appeal, and restore the order of the Insolvency Court declaring that the property in question forms part of the property of the insolvent and is liable to be divided amongst the creditors. The Official Receiver must have the costs of this appeal.


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