1. This is an appeal under Section 46 of the Provincial Insolvency Act against the order of the District Judge of Trichinopoly setting aside a hypothecation of Rs. 9,000 executed by the insolvent in favour of the appellant, on the finding that it was not proved to have been made in good faith and for valuable consideration. The appellant contests this finding before us, on the ground that the learned Judge has acted on statements made by a number of persons before the Official Receiver which are not legal evidence and has not tried the case properly. Before applying under Section 36 of the Act, the Official Receiver seems to have held an enquiry himself and taken statements on oath from the insolvent and some of his witnesses. These statements were treated as evidence before him by the Judge; and his enquiry in Court was practically a continuation of the enquiry before the Receiver. I am unable to treat this as a proper disposal of the case. The District Judge should have himself taken the evidence on which he was going to act under Section 3o of the Act. No provision of law has been shown to us authorising him to rely on statements made before the Receiver. The Allahabad High Court has held, in Jagannath v. Lachman Das 26 Ind. Cas. 32 : 12 A.L.J. 889, that a District Judge acting under Section 36 has no power to refer the matter to a subordinate Court but that he alone has jurisdiction in the matter and should himself decide upon such evidence as is available. Even the report of the Receiver is made evidence by the Act only for the purposes of Section 44, and not under any other section.
2. The first respondent's Advocate, feeling the difficulty, has suggested to us that we may treat these statements either as affidavits of the persons making them or as evidence on commission taken by the Receiver. I am unable to accept either of the suggestions. They were not treated as affidavits in the lower Court; nor are they shown to have been properly sworn to or to have been admissible as affidavits in the enquiry before the learned Judge. The second suggestion is clearly opposed to fact. To enable a Commissioner to take evidence there must be the prior issue of a writ of commission to him by the Judge; it is not pretended that any such thing took place in this case.
3. It was next urged for the first respondent that, as the appellant himself consented to the admission of the statements in question and relied upon them in the lower Court, he cannot be allowed to object to them now and that as under Section 36 the burden of proof is on him to prove good faith and valuable consideration for his document, he must fail unless, on the evidence on record left after expunging the statements objected to, he is able to establish the validity of his transfer.
4. Taking the first part of the argument first, it may be stated that there is nothing on record to show that the appellant consented to the course adopted by the District Judge. He perhaps did not expressly object to the course and when the District Judge decided to act on the previous statements he also relied on them; that cannot be treated as consent. The omission to object to what is not relevant evidence cannot make it relevant. See the observation of the Privy Council in A.B. Miller, Official Assignee of the Estate of Ramkrishen Das v. Babu Madho Das 19 A. 76: 23 I.A. 106 : 9 Ind. Dec. 51,
5. On the second part of the argument it is not denied that the burden of proof is on the appellant. In fact this question was recently decided in Anantarama Aiyar v. Yussufji Oomer Sahib 36 Ind. Cas. 903 : (1916) 2 M.W.N. 236, which ruling I follow. If I were satisfied that the appellant relied upon evidence which he knew to be inadmissible and deliberately failed to adduce his other evidence, I should, no doubt, adopt the course suggested by the first respondent. But I am of opinion that the parties were honestly misled by the course adopted by the Judge. It will, therefore, be unfair to dispose of this appeal on the balance of evidence on record, which is meagre, left after expunging the inadmissible statements. I think the parties ought to be given an opportunity to adduce fresh evidence. As the case has not been properly tried and disposed of by the lower Court, I set aside the order under appeal and remand the case to the District Judge for a fresh disposal according to law. The costs of the appeal will abide and follow the result and will be provided for in the final order of the District Judge.
6. I agree. I would further invite the District Judge's attention to the observations in my judgment in Kumarappa Chettiar v. Murugappa Chettiar 36 Ind. Cas. 771, regarding the advisability of the Official Receiver's conducting proceedings on behalf of the general body of creditors. They are relevant in this case also.