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The Official Assignee of Madras Vs. G. Sambanda Mudaliar - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1920)39MLJ345
AppellantThe Official Assignee of Madras
RespondentG. Sambanda Mudaliar
Cases ReferredMok Gulab Chand v. Mahomed Mehde Tharia Topan I.L.R.
Excerpt:
.....and section 36 of the provincial insolvency act to show that the transaction was one executed in good faith and for consideration. it is also open to other creditors, if they are not satisfied with the admission, similarly to obtain an adjudication and in that adjudication the matter has to be decided with reference to the ordinary legal presumptions which arise. [the learned chief justice then considered the evidence in regard to the point whether the mortgage transaction in question was entered into in good faith and for consideration. ] 4. on the whole i have no hesitation in coming to the conclusion that the mortgagee has failed to discharge the onus that was on him of showing that the transaction was entered into in good faith and for consideration. 340. 5. i have not dealt with..........and section 36 of the provincial insolvency act to show that the transaction was one executed in good faith and for consideration. that has been repeatedly held as regards section 36 and it has also been held as regards section 55 the language of which is identical, by sir arnold white, c.j., in the official assignee v. annapurnammal (1913) 20 i.c. 901 and in another calcutta case. in this case the burden is, if anything, stronger because we have a mortgage at the usurious rate of 24 per cent. by a young man who has just came of age and who was squandering his property in dissolute courses. i do not know if it was supposed that the fact that the official assignee was moving to expunge a proof which he had admitted under section 36 of the second schedule to the act altered the onus of.....
Judgment:

John Wallis, C.J.

1. This is an appeal from the judgment of the Hon'ble Mr. Justice Coutts Trotter dismissing an application of the Official Assignee to expunge the proof of one Sambanda Mudaliar as a secured creditor on a mortgage alleged to have been executed in June, 1916.

2. This case has brought to the notice of the Court not for the first time the existence in this city of dangerous gangs who take advantage of the fact that the Indian Majority Act enables young men to dispose of their property before they have sufficient sense to manage it and get them to execute conveyances for little or no consideration and thus strip them of their possessions. I am not unaware of the considerations which actuated the legislature in fixing the age of 18 as the age of majority but I hope that this matter may receive reconsideration in the near future with the object of stopping scandals such as have come to light in this Court in this case and in other recent cases.

3. In this case the insolvent who came of age in 1916 by August of that year had been stripped of all his property and found himself in the Insolvency Court, where his brother has preceded him, and in this case also we have had before us the case of another young man named Kuppuswami who in a brief career which came to an untimely end made away with the estate which his father had acquired in the well-known firm of Messrs. Thompson and Co., in this city. The learned Judge in another suit has already set aside two mortgages which were obtained by another gang from this insolvent and that decision has been confirmed on appeal; and the reason why a different fate attended the present application appears to be that, as stated by the learned Judge in his judgment, the proceedings before him were conducted upon the footing that the, onus was admittedly on the Official Assignee. I do not know how that view came to be taken. In law a mortgagee setting up a mortgage executed within two years of the insolvency has the onus cast on him under Section 55 of this Act, and Section 36 of the Provincial Insolvency Act to show that the transaction was one executed in good faith and for consideration. That has been repeatedly held as regards Section 36 and it has also been held as regards Section 55 the language of which is identical, by Sir Arnold White, C.J., in The Official Assignee v. Annapurnammal (1913) 20 I.C. 901 and in another Calcutta case. In this case the burden is, if anything, stronger because we have a mortgage at the usurious rate of 24 per cent. by a young man who has just came of age and who was squandering his property in dissolute courses. I do not know if it was supposed that the fact that the Official Assignee was moving to expunge a proof which he had admitted under Section 36 of the second schedule to the Act altered the onus of proof; but I think it is clear that it has no such effect. An admission of proof by the Official Assignee is in no sense an adjudication and it is open to him if he thinks that the proof was improperly admitted to have an adjudication by Court on notice. It is also open to other creditors, if they are not satisfied with the admission, similarly to obtain an adjudication and in that adjudication the matter has to be decided with reference to the ordinary legal presumptions which arise. Possibly the fact that the insolvent in his examination Ex. K 1, in April, 1917, told the Official Assignee 'I got the money Rs. 4,000 and odd. It was in rupees and notes. I have spent it for drinking and women ' may have influenced the view that the onus was on the Official Assignee. The difficulties of these oases are illustrated by the fact that the insolvent made that statement to the Official Assignee under what inducement, we know not, because his explanation that he was drunk when he made it is absurd. However it is nobody's case now that on the execution of this mortgage the insolvent was paid Rs. 4,000 in rupees and notes and that circumstance cannot affect the burden. I attach considerable importance to this question of burden of proof because from the learned Judge's judgment I think that, if the burden that was placed on the Official Assignee had not been placed on him, he would have arrived at exactly the same conclusion at which we have arrived.

[The learned Chief Justice then considered the evidence in regard to the point whether the mortgage transaction in question was entered into in good faith and for consideration.]

4. On the whole I have no hesitation in coming to the conclusion that the mortgagee has failed to discharge the onus that was on him of showing that the transaction was entered into in good faith and for consideration. All that is shown is that a payment of Rs. 340 was admittedly made about the time of the execution of that mortgage. But the statute says that a mortgage of this kind if executed without consideration, is void. Even as to this Rs. 340, as was held by the late Chief Justice in another case, the proper course is to set aside the whole mortgage and allow the mortgagee to prove as an unsecured creditor for Rs. 340.

5. I have not dealt with the oral evidence of the insolvent and the widow, Meenakshi Animal, though it supports the conclusious at which I have arrived because it is obviously unreliable. It is, however, strongly corroborated by the evidence to which I have referred which is in itself sufficient to support the conclusion at which 1 have arrived.

6. The appeal is allowed, except as to Rs. 340 with costs both here and below on the original side scale.

7. Certify for two counsel.

Krishnan, J.

8. This is an appeal from the order of Coutts Trotter J. dismissing a petition of the Official Assignee, in the matter of the insolvency of a young man named Devarajulu, praying for the annulment of a mortgage executed by him to one Sambanda Mudaliar, under Section 55 of the Presidency Towns Insolvency Act. That section provides that a transfer of property made by a person who is adjudged an insolvent within two years from the date of the transfer shall be void against the Official Assignee and may be annulled by the Court unless the transfer was made before and in consideration of marriage or was made in favour of a purchaser or incumbrancer in good faith and for valuable consideration. It has been held with reference to Section 36 of the Provincial Insolvency Act, which is worded exactly and similarly as Section 55, that if the transfer is shown to be within two years of the insolvency the burden is on the transferee to prove that he comes within the exception by showing good faith and valuable consideration. See Nimoni Choudhri v. Basanta Kumar Banerji (1914) 19 C.W.N. 865 This view was approved of in Anantarama Aiyar v. Yussuf Omer Sahib (1916) 31 M.L.J. 183 and in The Official Assignee v. Annapurnammal (1918) 20 I.C.901 White C.J. assumed that the onus was on the transferor in a case under Section 55 itself though he did not expressly decide it The manner in which the section is worded making an exception in favour of buna fide encumbrancers for valuable considerate, clearly throws the onus on the person who alleged that he is within the exception. No case has been cited to us to the contrary, but it was urged in the present case the onus was on or had been shifted on to the Official Assignee as at an earlier stage of these insolvency proceedings he had accepted the proof of the mortgage and admitted his claim. I do not think this contention is tenable. The Official Assignee's action was based, on what was then led to believe were the real facts of the case by the mortgagee but now he states that he has been shown reason to think that he was wrong in this view and he has applied to the Court to annul the mortgage under Section 55. The way in which the Court has to deal with the matter when it comes before it depends entirely on the wording; of the section and is not affected by anything the Official Assignee might have done previously. What the Official Assignee did here was merely to come to a conclusion on the evidence placed before him by the mortgagee, that cannot be treated as an admisston against him, or against the body of credtors whom he represents. It follows that the onus is still on Sambanda Mudaliar and has not been shifted

9. There is a further reason why in the present case the onus should be placed on him to prove consideration for his document. The mortgagor is a young man who had come into property on his father's death and who had just attaned his majority It is clear from his schedule that he was borrowmg recklessly. With reference to another mortgage excuted by this very youth about the time that the mortgage in question here was executed, we recently held following the ruling in Mok Gulab Chand v. Mahomed Mehde Tharia Topan I.L.R. (1896) B. 367 that the burden was shifted on to the mortgage to prove consideration, See O.S.A 26 and 43 of 1919. The petition is the same in this case and therefore the onus is in my opinion on Sambanda Mudaliar for both the above reasons to prove the good faith and the consideration for his mortgage, before we can uphold it.

10. The learned Judge then considered the evidence in regard to the point whether the mortgage transaction in question was entered into in good faith and for consideration.

11. Finding then that the mortgagee has failed to prove that his mortgage was made in good faith and for proper consideration it must be annulled under Section 55 of the Act. But as it is admitted that the mortgagee paid Rs. 340 to Devarajulu, he must be allowed to claim Rs. 340 from the insolvent's estate. The proper order in such a case seems to be as held by White. C.J. in 20 Ind. Cas. 901 to set aside the mortgage in toto and treat the mortgagee as an unsecured creditor for the amount advanced by him.

12. I would therefore allow the appeal and annul the mortgage Ex. H and direct Sambanda Mudaliar's name to be retained in the schedule as an unsecured creditor for Rs. 340. He must pay the Official Assignee's costs in this appeal and in the first Court. We certify for two Counsel in the Lower Court; costs on Original Side scale.


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