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In Re: Thakurbhai Maganlal Desai - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1943Cal140a
AppellantIn Re: Thakurbhai Maganlal Desai
Cases ReferredLister v. Hooson
Excerpt:
- .....the son of the life policy took place within two years of the insolvency it is void as against the official assignee, and it is not disputed nor argued, the official assignee is entitled to recover whatever the insurance company is liable to pay upon the policy. the respondent insurance company claims that it is entitled to the benefit of section 47, presidency towns insolvency act, by which the amounts of mutual dealings between the insolvent and a creditor proving or claiming in insolvency can be set off one against the other, and the company can therefore set off out of the sum due to it upon the marine policies an amount sufficient to discharge its liability upon the life policy. the official assignee contends that the insurance company cannot avail itself of section 47 as the.....
Judgment:
ORDER

Gentle, J.

1. The insolvent effected a policy of life insurance with the Jupiter General Insurance Company for Rs. 5000 on 12th August 1933. He assigned this policy to his son in consideration of natural love and affection on 20th June 1940 within two years of adjudication of insolvency on 5th December 1940. The insolvent also effected some policies of marine insurance with the same insurance company upon which Rs. 1891-2-0 premia remain payable. The surrender value of the life policy is Rs. 1261. The insurance company has appeared as respondent in this application. Under Section 55, Presidency Towns Insolvency Act, as the transfer by the insolvent to the son of the life policy took place within two years of the insolvency it is void as against the Official Assignee, and it is not disputed nor argued, the Official Assignee is entitled to recover whatever the insurance company is liable to pay upon the policy. The respondent insurance company claims that it is entitled to the benefit of Section 47, Presidency Towns Insolvency Act, by which the amounts of mutual dealings between the insolvent and a creditor proving or claiming in insolvency can be set off one against the other, and the company can therefore set off out of the sum due to it upon the marine policies an amount sufficient to discharge its liability upon the life policy. The Official Assignee contends that the insurance company cannot avail itself of Section 47 as the interest of the Official Assignee arises by operation of law under Section 55 of the Act and the money payable upon the life policy was not a debt due to the insolvent who had parted with his personal benefit and interest before the insolvency.

2. On behalf of the company, it is contended that if no transfer by the father to the son had taken place, and the father had not become an insolvent and had claimed for the surrender value of the life policy, the c6m-pany could have set off the amount due to it upon the marine policies against its liability upon the life policy. By Section 132, T.P. Act, the transferee of an actionable claim takes it subject to all the liabilities and equities to which the transferor was subject at the date of the transfer. Therefore, if the father had not been adjudicated insolvent, the company would have been able to set off a claim by the son, as transferee, similarly as it could against the father, in the absence of the transfer. Again, if there had been no transfer before the insolvency, the company would have been entitled to set off provided in Section 47, Presidency Towns Insolvency Act, the transactions of life and marine insurances and the amount due from the company on the life policy and the sums due from the insolvent on the marine policies being mutual dealings. Learned Counsel for the Official Assignee conceded the correctness of the above contentions. It was further contended on behalf of the company that the factum of the transfer and its avoidance by the Official Assignee under Section 55 of the Act has not affected the right of the company under Section 47. The relevant provisions of the Presidency Towns Insolvency Act are as follows:

Section 17. On the making of an order of adjudication the property of the insolvent wherever situate shall vest in the Official Assignee.

Section 47. Where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt under this Act an account shall be taken of what is due from the one party to the other in respect of such mutual dealings and the sum due from the one party shall be set off against any sum due from the other party and the balance of the account and no more shall be claimed or paid on either side respectively.

Section 55. Any transfer of property, not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent within two years after the date of the transfer be void against the Official Assignee.

3. Section 55 does no more than enable the Official Assignee to avoid a transfer by the insolvent. It does not provide for the subject of the avoided transfer to vest in the Official Assignee. When a transfer is avoided there is no doubt the subject of it does vest in him; Section 17 is the sole vesting provision in the Act. The right or title of the Official Assignee is on account of it being the property of the insolvent vesting in him upon insolvency. When a transfer of property by an insolvent is void under Section 55, then it is in the same position as before the transfer, namely, it is the insolvent's property and, by Section 17, as such it vests in the Official Assignee. Section 55 merely enables the Official Assignee to avoid a transfer by the insolvent.

4. In support of the argument for the Official Assignee that his title to property, which was the subject of the avoided transfer by an insolvent, is separate and apart from the insolvent's title reference was made to Lister v. Hooson (1908) 1 K.B. 174. This is a decision of the Court of appeal under the English Bankruptcy Act, 1883, in which Sections 88 and 47 correspond respectively to Sections 47 and 55, Presidency Towns Insolvency Act. In that case a voluntary settlement by a bankrupt upon his wife of 250 before adjudication was declared void against the trustee in bankruptcy under Section 47 of the English Act. At the date of the bankruptcy, there was a debt due to the wife from the bankrupt of 250 and she claimed to set off this debt under Section 38 of the English Act against the claim by the trustee for the like amount of the avoided settlement. Vaughan Williams and Buckley L. JJ. held (Fletcher Moulton L.J. dissenting) that the sum of 250 claimed in respect of the voluntary settlement was not a debt due to the bankrupt from his wife and that there was, therefore, no right of set off under Section 38. The ratio decidendi of the decision was that the bankrupt could not have recovered the amount of the settlement from his wife and there was therefore no debt due to him which could be the subject of set-off under Section 38, the amount could only be recovered by the trustee. In his dissenting judgment Fletcher Moulton L.J. at p. 182 observed that the right of the trustee to property under a void settlement is based upon its being property of the bankrupt : ad there was no reason why it should be treated otherwise than any other money belonging to him in the hands of the same person would be treated and it was a proper subject of set-off The learned Lord Justice referred to and relied upon In re Farnham (1895) 2 Ch. 799 also a decision of the Court of Appeal under the Bankruptcy Act, 1883, and given by Lindley, Lopes and Rigby L. JJ. A bankrupt made a voluntary settlement of some plate on his wife within two years of bankruptcy, he then became a lunatic and subsequently bankrupt. The trustee claimed the plate as the settlement was void under Section 47 of the English Act. As lunacy had supervened between the dates of the settlement and bankruptcy the effect of the English Lunacy Act, 1890, and the powers of the Judge in Lunacy in regard to a lunatic's property had to be considered and the trustee's claim failed on that account. The observations of the learned Lord Justices upon the effect of the English Act regarding an avoided voluntary settlement are nevertheless in point. Lindley L.J. at p. 808 said:

If the settlement is void as against the trustee, it is void altogether. The section does not mean that the property, the subject of the settlement, vests in the trustee by a title which overrides both that of the donor and of the donee. The settlement being void the property reverts to the donor, and it is as the donor's property that it vests in the trustee.

5. Lopes L.J. at p. 810 said:

It was said that this property was the property of the wife and that the gift as it had been made within two years of the adjudication in bankruptcy was void as against the trustee. But if the gift was void, the property became vested in the donor.

6. Rigby L.J. at p. 812 said:

It is quite plain that the Act intended that the property should come to the trustee, not as the property of the beneficiary under the settlement but as if the settlement never had existed : that is to say, it passes as the property of the bankrupt.

7. Returning to the present case and applying the principles enunciated above, upon the avoidance of the transfer by the insolvent to his son the position is the same as if there never had been any transfer and the life policy reverts to and is the property of the insolvent. As such, it passes to and vests in the Official Assignee. If there had been no transfer indisputably the company would have been entitled to the set off in Section 47, Presidency Towns Insolvency Act. The Official Assignee does not obtain the policy by a separate and distinct title but as property of the insolvent which vests in him under Section 17. The transactions in respect of the policies were mutual dealings between the company and the insolvent. The company is therefore entitled to set off the monies due to it upon the marine policies against the amount of the surrender value of the life policy which it is liable to pay and the balance alone will be paid by the company or proved in the insolvency as the case may be.

8. It is of interest to find that in the appendix of forms of the Insolvency Rules of this Court, Form 1A is given as that required in an application to declare a transfer void against the Official Assignee. One of the prayers is that the property comprised in the transfer belongs to the Official Assignee as part of the property of the insolvent. The decision in Lister v. Hooson (1908) 1 K.B. 174 was on the ground that there was no debt due from the transferee to the transferor which could be set off against a debt due to transferee. The position is different in the present case inasmuch as the subject of the transfer is a debt due from a third person. If my judgment is at variance with this authority, I must respectfully beg to differ from it. I prefer the conclusion expressed in the dissenting judgment of Fletcher Moulton L.J. and the decision and judgment in In re Farnham (1895) 2 Ch. 799.

9. There will be a declaration that the assignment of the policy of insurance No. 3654 on the life of the insolvent effected with the Jupiter General Insurance Company Limited and dated 12th August 1933, is void as against the Official Assignee. The insurance company did not dispute the right of the Official Assignee to avoid the transfer. The whole contest has been regarding the set off under Section 47 of the Act. Upon this the company has succeeded and is therefore entitled to its costs from the Official Assignee. Certificate for counsel. The costs awarded to the respondent company and the costs of the Official Assignee will be paid out of the estate of the insolvent.


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