1. One Maradugula Venkataratnam applied to be declared insolvent, on the 24th of March, 1910, and he was adjudicated as an insolvent on the 31st of August, 1912. Within three months of the petition in insolvency, the house, which is the subject of this appeal, was nominally transferred for Rs. 4,000, on the 4th of January, 1910, to one Perrazu, who is the 2nd respondent. Admittedly, the consideration for this sale remained unpaid. On the 22nd of August, 1912, the same property was sold to the appellant, for the same price of Rs. 4,000, by the 2nd respondent. There was a composition of the claims of the creditors, approved by the District Court, upon which the District Court annulled the adjudication, on the 19th December, 1912. There was an appeal to the High Court, the result of which was-that the adjudication was restored on the 24th of March, 1914.
2. The Lower Court has found that the transaction, by which the appellant purchased the house in question, was voidable,, under Section 53 of Act V of 1920, as being a transfer of property, not made in good faith and for valuable consideration, within two years of the transferor being declare) insolvent.
3. The important facts in the case are that the first sale was without consideration; that the appellant is the nepbew and son-in-law of the first insolvent; and that he admitted in his evidence that he was aware of the presentation of a petition by his father-in-law, to be adjudicated insolvent, soon after that petition was filed. One Asuram had a mortgage decree against the insolvent in O.S. No. 10 of 1909 and one of the terms of Ex. I(a) was that the sale amount should be paid towards the mortgagee-decree-holder's decree. The appellant paid Rs. 4,700 to Asuram, on the 12th of February, 1914, and it is now argued that payment was bona fide, because, it was made according to the terms of the transfer deed, in favour of the appellant's vendor; but the appellant must have been aware at the time that an appeal was pending from the District Court's order, annulling the adjudication, and therefore if he paid any part of the consideration for his transfer, during the pendency of that appeal to a stranger, he did so at his own risk. He was not personally bound by the covenant in Ex. I(a), which was executed before the insolvent had applied for adjudication, as regards the promise to pay the mortgagee Rs. 4,000 of the purchase-money. Any such covenant that was contained in the document was subject to the result of the property passing away, out of the insolvent's control and becoming vested in an Official Receiver. The appellant, in ignoring the fact that an appeal was pending against the annulment of adjudication and in paying the unpaid purchase-money to a stranger, in order to benefit his own father-in-law, evidently acted without good faith and at his own risk.
4. We, therefore, agree with the Lower Court that the transaction was voidable under Section 53, corresponding to Section 36 of the old Insolvency Act and dismiss the appeal with costs.