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Mary Ninan Vs. Official Receiver Kottayam District Court - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKerala High Court
Decided On
Case NumberA.S. No. 608 of 1958
Judge
Reported inAIR1959Ker380
ActsProvincial Insolvency Act, 1920 - Sections 53
AppellantMary Ninan
RespondentOfficial Receiver Kottayam District Court
Advocates: C.K. Sivasankara Panicker, Adv.
DispositionAppeal dismissed
Cases ReferredRamaswamy Aiyengar v. Official Receiver
Excerpt:
- - if so the fact that the insolvent was wanting in good faith would not according to learned counsel affect the validity of ext. it is no doubt true that the expression 'good faith' in section 53 of the insolvency act does not contemplate that both parties to the transaction should act in good faith and the section requires only proof of absence of good faith on the part o the transferee and not the absence of good faith on the part of 'the transferor. veerappa chettiar, air 1938 mad 285. rut we are perfectly clear that the evidence in the case taken as a whole clearly bear out the judge's conclusions in the matter here questioned. 3's financial affairs and was wanting in good faith when he got p. indeed the question of determining good faith with respect to a 'transfer under section..........indebtedness o the insolvent at date of ext. a. if so the fact that the insolvent was wanting in good faith would not according to learned counsel affect the validity of ext. a. it is no doubt true that the expression 'good faith' in section 53 of the insolvency act does not contemplate that both parties to the transaction should act in good faith and the section requires only proof of absence of good faith on the part o the transferee and not the absence of good faith on the part of 'the transferor. see kullappa reddiar v. veerappa chettiar, air 1938 mad 285. rut we are perfectly clear that the evidence in the case taken as a whole clearly bear out the judge's conclusions in the matter here questioned. the promissory note debt of p. w. 1 himself was of long standing and only being.....
Judgment:

N. Varadaraja Iyengar, J.

1. This appeal arises out of an order passed by the court below in its insolvency jurisdiction avoiding at the instance of the Respondent-Official Receiver, a sale deed executed by the insolvent to the appellant's mother as amounting to a voluntary transfer.

2. The Insolvent T.P. Cherian was a retired Inspector of Schools and was adjudged as such on his own petition dated 30-12-1117. He was then indebted to the extent o about Rs. 2000/- the principal debt being a co-operative award for aboutRs. 1450. It was after this award had been passed that he executed Ext. A sale herein, in favour of Annamma, the wife of his younger brother Tharian on 5-5-1116. The sale was again of the only property of the insolvent left with him at the time, viz., a 40 cent vacant plot lying along with a 52 cents plot and building belonging to Phillippos-another brother of the insolvent; on the side of the K. K. Road within one mile of the Municipal limits of Kottayam town. These two plots, totaling 92 cents had been jointly mortgaged with possession by the insolvent and Phillippose in 1114 and the mortgage was still outstanding.

Ext. A therefore was jointly executed by the insolvent and Phillippose and comprised all their 92 cents as above. The total consideration of Rs. 1380/- under it was made up of 4 items which were all reserved with the vendee, viz., (i) Rs. 500 for payment to the prior usufructuary mortgagee of the property, (ii) Rs. 210 for payment to brother Tharian as balance under Ext. II pro-note dated 16-12-110 executed by him by the insolvent, (iii) Rs. 390 for payment to 'the insolvent himself on demand at any future date, and (iv) Rs. 280 for payment to Phillippose joint vendor.

3. The vendee's husband Thariaii examining himself as P. W. 1 claimed that Ext. A was taken benami for himself in the name of his wife, and that he had adjusted the 2nd item of consideration and further paid off the 3rd item under a reccipt. Ext. V dated 7-5-1116, viz., within two days of Ext. A. He also spoke to having redeemed the prior mortgage and obtained possession of the property. The insolvent examined as P. W. 3 admitted that there was no pressure either from the mortgagee or his brother Tharian about the clearing off, of their debts at the lime of Ext. A. Hut he said his son's illness required ready cash money and so he was compelled to sell.

He did not make any provision for any other creditors because no money was left and they were not also insistent. On the valuation of the property P. W. 1 and P. W. 3 spoke to Rs. 15 or 20 per cent as a reasonable price at the time and P. W. 3 went so far as to say that he got credit for only Rs. 600' at Rs. 15 per cent but this was obviously wrong since his proportionate mortgage debt and the items 2 and 3 under Ext. A came in all to Rs. 818. There was the evidence before the lower court of the Secretary of the creditor Society as P. W. 2 that the value per cent of the property in 1118 was Rs. 50 though at the date of the annulment petition it had soared up to Rs. 250.

On this evidence the court below-was easily able to come to the conclusion that the sale deed was for gross undervalue and executed in fraud and collusion with a view only to the selfish advantage of the insolvent. It found in favour of the vendee in respect of the promissory note forming the 2nd item of consideration under Ext. A but it was definite that 3rd item of ready cash consideration did not pass, particularly in view of the artificial interval of two days between Ext. A and the alleged payment under Ext. V. As to the bona fides of the transaction, P. W. 1 no doubt, protested his innocence and even swore to ignorance of the insolvent's financial embarrassment at the time but the court below refused to believe him and so set aside Ext. A so far as the insolvent was concerned. Hence this appeal by the 2nd respondent in the count below, who had been impleaded as legal representative of her mother the 1st respondent there.

4. Mr. Sivasankara Panicker, learned counsel for the appellant strenuously contended that there was no warrant for the court below to discard Ext. V receipt and also P. W. 1's statement as to hisignorance of indebtedness o the insolvent at date of Ext. A. If so the fact that the insolvent was wanting in good faith would not according to learned counsel affect the validity of Ext. A. It is no doubt true that the expression 'good faith' in Section 53 of the Insolvency Act does not contemplate that both parties to the transaction should act in good faith and the section requires only proof of absence of good faith on the part o the transferee and not the absence of good faith on the part of 'the transferor. See Kullappa Reddiar v. Veerappa Chettiar, AIR 1938 Mad 285. Rut we are perfectly clear that the evidence in the case taken as a whole clearly bear out the Judge's conclusions in the matter here questioned. The promissory note debt of P. W. 1 himself was of long standing and only being slowly reduced. The creditor Co-operative society had also taken out execution against the movables of P. W. 3 so as to provoke the filing of the Insolvency petition itself. It was further acknowledged that there was no want of cordiality among the brothers. There is finally the finding we have con-finned that Ext. V receipt was a faked up one.

The inference is in the circumstances irresistible that P. W. 1 was aware of P. Ws. 3's financial affairs and was wanting in good faith when he got P. W. 3 to execute Ext. A. Learned counsel stressed the fact that the sale here was not by the insolvent alone. But this by itself is of no consequence and after all one does not know about Phillippose's affairs. Indeed the question of determining good faith with respect to a 'transfer under Section 53 depends not alone oil the recitals and covenants contained in it; the circumstances surrounding the transaction and the conduct of 'the parties at the time of and after the execution of the deed should be taken into account. The facts should be considered in relation to each other and weighed as a whole, See Seth Ghansham Das v. Uma Prasad, 36 Mad LJ 483; (AIR 1919 PC6).

5. Learned counsel then said that to the extent of the proportionate mortgage amount covered by item 1 and also of item 2 of the consideration paid off his client must have a charge upon the properly. There can be no doubt that the appellant is entitled to have a charge for the mortgage amount but he can rank only as an ordinary creditor in respect of Rs. 210 covered by the 2nd item promissory note. Reference may in this connection be made to Ramaswamy Aiyengar v. Official Receiver, AIR 1926 Mad 672, which is almost a parallel case.

In that case two items of consideration as stated in the document of mortgage impugned, consisted of two debts, one due to a secured creditor and the other to an unsecured creditor. Both these the mortgagee discharged. There was a further cash payment recited but it was proved that the mortgagee had not made it. The document was annulled but the mortgagee was allowed to rank as a secured creditor- to the extent of the mortgage and as an unsecured creditor to 'She extent of the debt. Learned Judges observed:

'The general principle applicable to cases under S. 53 of the Provincial Insolvency Act, I think is this: the assignment, as an assignment is void; but, for money genuinely paid in discharge of genuine debts, the alienee will stand in the shoes of those whom he has paid. In the case of a mortgage debt paid off the transfer will not operate as a mortgage at all, not even to the extent of the amount paid, but the alienee will be entitled to rank in the schedules of secured creditors to the extent of his payment.'

6. We therefore dismiss the appeal and affirm the order of the court below subject however to the modifications as provided for above. There willbe no order for costs as the respondent has not appeared.


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