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Buchayyagari Ranga Reddy Vs. the Official Receiver - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported inAIR1938Mad177; (1937)2MLJ868
AppellantBuchayyagari Ranga Reddy
RespondentThe Official Receiver
Cases Referred and Venkanna v. Official Receiver of East Godavari
Excerpt:
- - the very fact that section 54 has been invoked, shows that while one creditor has been benefited, there are others who, as the result of the act impeached, have been defeated or defrauded. in a case like the present, it is natural, if not inevitable, that the debtor has present to his mind, as one view among several, the giving of a preference to the particular creditor benefited; but if we are to consider whether amongst all the shadows which pass across a man's mind, some view as well as the dominant view influenced him to do the act, we shall be embarking on a dark and unknown voyage across an exceedingly misty sea......in making the transfer. is it a reasonable inference from the facts above mentioned, that the dominant view which influenced the second respondent was to prefer a particular creditor, or, is it more reasonable to hold that he acted with a view to protect himself from exposure or from any sort of proceedings? the first respondent was pressed to say in cross-examination:as i was his son-in-law, the second respondent wanted to pay me first.4. the learned district judge seizes upon this answer for the purpose of inferring that the transferor's object was to give the creditor a preference. he forgets that a debtor in giving a security to a particular creditor often acts from mixed motives. the very fact that section 54 has been invoked, shows that while one creditor has been benefited,.....
Judgment:

Venkatasubba Rao, J.

1. The question to decide is whether the sale-deed impeached amounts to a fraudulent preference under Section 54 of the Provincial Insolvency Act. The material dates are these. The second respondent was adjudicated insolvent on 30th November, 1931, on a creditor's petition dated 8th August, 1931. The insolvent had executed the sale-deed in question on the 27th July, 1931, in favour of his nephew and son-in-law, the first respondent. On 9th July, 1932, the application, out of which this civil revision petition arises, was made by the Official Receiver for the setting aside of the sale-deed. The learned District Judge, reversing the decision of the trial Court, has held that the conveyance amounts to a# fraudulent preference. The first respondent, the transferee, questions the correctness of the District Judge's order.

2. There is practically no dispute about the facts which may be shortly stated. In 1922, the second respondent was appointed guardian of the first under the Guardians and Wards Act. As the record shows, bonds of the value of about Rs. 7,200 belonging to the ward were taken' possession of by the guardian. On 22nd February, 1931, the first respondent, who had by then attained majority, applied to the Court for directions against his quondam guardian, complaining that he had misappropriated the ward's funds and that proper accounts had not been rendered. The second respondent in his counter-affidavit, dated 6th July, admitted the breach of trust and, after putting forward various excuses, offered to convey his immovable property to get released from his obligation. The matter was apparently adjourned to enable the second respon dent to carry out his promise and on 27th July, as already stated, the sale-deed in question came into existence. The sale purports to be for Rs. 6,000, the second respondent having been given credit for some amounts which he alleged to have expended on his ward's behalf. The application was finally disposed of on 8th August, when the Judge after recording the settlement dismissed the petition. On the same day, as already noted, the petition to adjudicate the second respondent insolvent was filed.

3. On these facts the question arises, does the conveyance amount to a fraudulent preference under Section 54 of the Provincial Insolvency Act? Both the Courts concur in finding that there was a true pre-existing debt as alleged by the transferee. They concurrently find further that the property conveyed was not worth more than Rs. 6,000, the consideration mentioned in the deed. That a petition imputing breach of trust to the second respondent was then pending, is common ground. Beyond these admitted facts, the first respondent swears that some ill-feeling had arisen between him and his former guardian a circumstance to which the District Judge does not advert. True, when he moved the Court, the first respondent was aware, as admitted by himself in his affidavit, that the second respondent was 'on the brink of insolvency'. These being the facts, is the Judge's decision right? The test in such cases is, what is the dominant or operative motive of the debtor in making the transfer. Is it a reasonable inference from the facts above mentioned, that the dominant view which influenced the second respondent was to prefer a particular creditor, or, is it more reasonable to hold that he acted with a view to protect himself from exposure or from any sort of proceedings? The first respondent was pressed to say in cross-examination:

As I was his son-in-law, the second respondent wanted to pay me first.

4. The learned District Judge seizes upon this answer for the purpose of inferring that the transferor's object was to give the creditor a preference. He forgets that a debtor in giving a security to a particular creditor often acts from mixed motives. The very fact that Section 54 has been invoked, shows that while one creditor has been benefited, there are others who, as the result of the act impeached, have been defeated or defrauded. The question is not whether several motives have not operated on the mind of the creditor but what among them was the dominant or effectual motive. If the debtor is influenced solely by one motive, the case presents no difficulty whatsoever; but when the Court has to ascertain which of several motives is the operative or substantial motive, its task becomes difficult. In the present case, there is on the one hand the desire on the part of the debtor to protect himself; there may be on the other, in view of the admission referred to above, some desire to benefit his own near relative. In a case like the present, it is natural, if not inevitable, that the debtor has present to his mind, as one view among several, the giving of a preference to the particular creditor benefited; that could hardly be decisive of the matter. It would suffice to refer to the following cases where this question was considered by me in its different aspects: Aruna-chalam Chettiar v. Official Receiver of Tanjore : (1925)49MLJ562 Ramaswami v. Chinnathambi : AIR1932Mad459 Gangappa v. Official Receiver of Bellary (1934) 41 L.W. 358 and Venkanna v. Official Receiver of East Godavari (1934) 68 M.L.J. 57. In addition, it may be useful to quote here the words of Bowen, L.J.:

It is an exceedingly difficult thing (it is possible no doubt, for juries may have to do it), to arrive at an opinion as to what is the dominant or operative motive of a man in doing a particular act. But if we are to consider whether amongst all the shadows which pass across a man's mind, some view as well as the dominant view influenced him to do the act, we shall be embarking on a dark and unknown voyage across an exceedingly misty sea. It is a very difficult matter to prove that the dominant motive was the sole motive, and I think that the true test under Section 92 is this: (1) had the debtor a view of giving a preference to the creditor? and (2) was that the operative effectual view?' (Hill, Ex parte: Bird, In re (1883) 23 Ch.D. 695 (C.A.).)

5. Applying this test, I can have no hesitation in holding that the lower appellate Court's decision is wrong and it is accordingly set aside and the petition is allowed with costs throughout.


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