1. The appellant herein is a guarantor and transferee of the stock-in-trade and business of the insolvent Messrs. Gitanjali a firm of partnership. The firm was dealing in textiles and it ran into debts. It had an overdraft account with the Bank of India. The eventual balance found due to the Bank from the insolvent as on 7-8-1971, was found to be Rs. 1 Lakh. The firm also had other debts, its total liabilities approximately amounting to Rs. 3,58,015. On 7-8-1971, the insolvent transferred its entire assets consisting of the stock-in-trade and the business in textiles to the appellant for a consideration of Rupees 1, 12,000. Out of this consideration, the appellant retained with himself a sum of Rs. 1 lakh for payment to the Bank of India and the balance of Rs. 12,000 he paid to the firm, which the Managing Director of the firm utilised for his own personal purposes. One P. V. Gandhi, one of the respondents before us filed a petition on 16-8-1971, for adjudicating the firm as insolvent under S. 9(b) and (d). Actually it was adjudicated as an insolvent on 1-12-1971, but this was in effect done under Section 9(c), the court holding that the transfer was a fraudulent preference and should be deemed under Sec. 56 to be fraudulent and void as against the Official Assignee.
2. The only question before us is whether the transfer in the circumstances mentioned by us, could be regarded as fraudulent and as one his by Sec. 56. It seems to us that there could be no doubt that the transfer is so hit.
3. In Lakshmana Chettiar v. Jayarama Chettiar, : AIR1972Mad34 which was concerned with Sec. 53 of the Transfer of Property Act, this court pointed out that where a debtor has several creditors and some property and if he transfers the property to one of the creditors without any furthe circumstances appearing, that might be a preference, but it could not be said to be a fraudulent preference; normally it is not improper for a debtor to prefer his creditor among the many in order to discharge his debt by transfer of property; in order to make a transfer of property; in order to make a transfer a fraudulent one, there should be something more than mere preference and the facts must establish that the preference is a fraudulent one.
4. That principle might apply if Sec. 9(c) of the Presidency Towns Insolvency Act stood by itself because that section merely speaks of fraudulent preference. But Sec. 56 which deals with avoidance of preference in certain cases lays down, when a transfer shall be regarded as a preference and a fraudulent preference which will be void against the Official Assignee. Any transfer when made by a person unable to pay his debts as they become due is with a view of giving the transferee a preference over the other creditors, such transfer, if such persons is adjudged insolvent on a petition presented within three months after the date of such transfer, be deemed fraudulent and void as against the Official Assignee.
5. The language of section admits of no doubt whatever. If the facts fall within the compass of the section, no discussion or speculation is called for to find whether the transfer is a fraudulent preference, void in its effect.
6. In the instant case, the transfer was on 7-8-1971. The adjudication of the insolvent made on 1-12-1971 relates back to 16-8-1971, the date of presentation of the petition for adjudication. The insolvent, had a number of debts, one of them being due to the Bank of India. The guarantor also was an obligee so far as the insolvent was concerned. All the facts, therefore, required for the application of Sec. 56, read with Sec. 9(c) are satisfied. The learned Judge was, therefore, right in setting aside the transfer as fraudulent preference and void as against the Official Assignee.
7. The appeal is dismissed with costs. We are informed that the appellant pursuant to the interim order of this court has deposited with the Official Assignee a sum of Rs. 1,57,000. The guarantor will of course stand on line for rateable payment before the Official Assignee on proof of his debts to his satisfaction.
8. Appeal dismissed.