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In Re: Rash Behari Roy and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Judge
Reported in(1890)ILR17Cal209
AppellantIn Re: Rash Behari Roy and anr.;rash Behari Roy and anr.
Respondent; Bhugwan Chunder Roy and ors.
Excerpt:
insolvent act (11 & 12 vic, chap. 21,) section 50 - imprisonment of insolvent on criminal side--false entries in books--fraudulent preference--fraudulent transfers--warrant, illegality of-- concealment of property. - .....charge of that offence, and that the judge, who has to try the case, should specifically find what offence the insolvent has been guilty of, and in his judgment, and in his order, and in the warrant, it should appear what the man has done. in this particular case the judgment shows that the judge was not convicting the insolvents of any specific offence, but the latter portion of his judgment shews, to my mind, pretty clearly what his view of the case was. what he says is: 'then comes the question: what i ought to do? i have considered this question with great anxiety. this is certainly the most fraudulent commercial case i have seen since 1 have been sitting as commissioner of this court. these people have made away with large sums of money. they have brought in their books after long.....
Judgment:

W. Comer Petheram, C.J.

1. This is an appeal from an order of Mr. Justice Trevelyan while sitting as Commissioner in Insolvency, and by which he committed two persons, who were insolvents and within the jurisdiction of the Court, to be imprisoned on the criminal side of the jail for a period of one year. That order was made by the learned Judge under the provisions of Section 50 of the Insolvent Act, and it is necessary to examine, for the purpose of what I have to say, the provisions of that section rather closely. That section provides 'and be it enacted that in case it shall appear to any Court for the relief of insolvent debtors that any such insolvent has fraudulently, with the intent to conceal the state of his affairs, or to defeat the objects of this Act, destroyed or otherwise wilfully prevented or purposely withheld the production of any book, paper or writing relating to such of his affairs as are subject to investigation under this Act, or kept or caused to be kest false books, or made false entries in, or withheld entries from, or wilfully altered or falsified any such book, paper, or writing, or that such insolvent has fraudulently, with intent of diminishing the sum to be divided among his creditors, or of giving an undue preference to any of the said creditors, discharged or concealed any debt due to or from the said insolvent, or made away with, changed, mortgaged, or concealed any part of his property, of what kind soever, such Court shall have power to adjudge that the insolvent shall be imprisoned for a period or periods not exceeding two years in the whole, as such Court shall direct, and to declare him entitled to his discharge as aforesaid at the expiration of the term of imprisonment to which he shall be sentenced, and by warrant under the seal of the Court to order him to be arrested and committed to prison and there to be detained accordingly. 'Now the matter came before Mr. Justice Trevelyan in this way: The appellants, the insolvents, were persons who had carried on a considerable trade for some years (they were brothers), and in August 1886 they were adjudicated insolvents on the petition of some of their creditors. The creditors, upon whose petition they were adjudicated insolvents, were not the opposing creditors at that time, but when they came up to be examined before the Commissioner of Insolvency, they were opposed by certain other creditors, and it was upon that opposition that this order was made. Prior to that order the books of these persons had been examined, they themselves had been examined and cross-examined, and certain witnessess had also been examined and cross-examined, and upon that the Commissioner came to certain conclusions and made an order in this form. As I said just now that order was made under the section of the Act which I have just read, and the first question we must consider here is what must have been made to appear to the Court, and in what way it must have been made to appear, before he had power to make an order under this section.

2. It is clear on the face of the section that it provides a punishment by way of penalty for the commission of certain offences, which punishment is to be administered by the Commissioner of Insolvency if it is made to appear before him that these particular offences have been committed. Speaking for myself, and I think for my brother PlGOT also, I am clearly of opinion that the words 'in case it shall appear' in this section must mean, in case it shall appear by legal evidence that the person to be punished has committed the specific crime he is said to have committed, and that before any person can he punished under that section, he must be shown by legal evidence to have committed one or other of the offences which are enumerated in the section, and that it is not enough for the Commissioner, upon the matter coming before him, to be satisfied that this is a very suspicious commercial case, or to be satisfied generally that there has been dishonesty on the part of the insolvents in the matter of the bankruptcy, but as I said just now, he must be satisfied that they have been guilty on some specific occasion of some one or other of the offences which are mentioned in the section.

3. It follows from that, that in my opinion, before a Commissioner can commit under this section, he must convict the person to be punished of something or other that he has done. Having said that, the next thing it is desirable I should do is to see what the Judge has done in this case. His judgment is one of considerable length, but the whole of it I need not read. In his judgment he says: 'I must hold that the putnis executed in favour of these ladies are not proved to my satisfaction. The hatchittas produced are not such as to enable me to place any reliance on them; making ordinary inferences, which I must necessarily make, I think it quite clear the putnis were executed in consequence of the service of the summons and not from the pressure put on the insolvents by the ladies; it was in consequence of the pressure of this suit in which a right to a large sum of money was depending.' So that, with reference to this putni, the view which the Judge appears to take, and the finding at which he has arrived is, that he cannot say whether there is consideration for the putni or not, but that the putni was executed in fact for the purpose of giving these ladies the preference over certain persons who had obtained a decree against them, and for the purpose of preventing those persons from executing that decree. Now, is that or is that not an offence within the meaning of this Act? The Act provides, as I said just now, that 'in case it shall appear to any Court that any such insolvent has kept or caused to be kept false hooks or made false entries in or withheld entries from or wilfully altered or falsified any such book, paper, or writing, or that such insolvent has fraudulently, with intent of diminishing the sum to be divided amongst his creditors, or of giving an undue preference to any of the said creditors, discharged or concealed any debt due to or from the said insolvent or made away with, changed, mortgaged, or concealed any part of his property, shall be imprisoned &c.;' The learned Judge finds, as a fact, that the object of this particular putni was, not to diminish the amount divisible amongst, or to give the ladies an undue preference over, the general body of creditors, but to prevent one particular decree-holder getting possession of the property and so to give the ladies an advantage over him. If this is the meaning of the finding of the Judge, it does not seem to me to constitute any offence within Section 50 of the Act at all, but having considered the evidence with reference to that which has been laid before us by Mr. Hill on behalf of the opposing creditors, it seems to me that in finding that the learned Judge has found as much against the insolvents within the meaning of the section as it was possible for him to do on the evidence, so that with reference to that charge, supposing it to be specifically found by the Judge with reference to that transaction we think that his finding is not sufficient to sustain his order.

4. Then comes the other terms of his judgment. He passes over one matter and then proceeds to deal with the mortgage transaction. He says: 'Next as to the mortgage, there has been a good deal of cross-examination with regard to it. The amount of consideration was Rs. 30,000. It alleged a previous debt of Its. 3,500 which was taken as part of the consideration, and then other payments were alleged, but these have been traced to a number of persons, some of whom are not creditors at all. They are persons whose names are entered in the books in a manner so suspicious that I think they are not creditors at all. It is not at all unlikely that this was done to get over paying their debts. I do not believe it the least likely they would be in the least anxious to pay their supposed creditors off and not to anything to get rid of the debts of the creditors. On the evidence before me I must find that if this money was taken from Debendronath Roy, if it has left the insolvents' hands, and if it has been paid to this alleged creditor, it was for the benefit of the insolvents and for the purpose of defrauding the creditors who had brought suits.' That is the finding with reference to the mortgage. Is that a finding of any offence within the meaning of this section? The first and most obvious objection to that finding of-the Judge is this: He does not find what the insolvents have done. The charge against them is one of two things; either that this mortgage is a sham transaction altogether, and so is a mortgaging the property for the purpose of diminishing the assets; or else, if the transaction was a real one, that the money has been secreted by them in such a way as that it is still available for their purposes and cannot be found for the creditors. The learned Judge does not find either of these two states of facts. He says it must be one or the other of the offences. He says: 'I believe it must be one or other,' as to that we have examined the evidence which has been laid before us, and we think that upon that evidence that was quite as much as the Judge could do. The evidence as to this is to some extent affected by the entries in the books, and as these entries have to do with the next charge as well, I will deal with the two altogether. He says; 'The seventh ground of opposition refers to the same matter. The sixth I have dealt with; it is putting the matter in the same form. The fifth is concealment of property. No doubt if the entries are fictitious, if the pottah is fictitious, and if the money has not been distributed, there has been concealment of property.'

I find, as a fact, that there have been fraudulent transfers of property; that the defence to the suits has been vexatious and frivolous; also that the insolvents have falsified their books. Although it appears in certain cases there have been entries after the balances were made up and carried over, entries made by mistake, yet there are a large number of cases in which payments have been made after the balances have been made up and have not been carried over. An examination of these payments shows that they are fictitious.

5. Now a large portion of this charge, which is found in this way by the Judge, rests upon these entries; and the conclusion as to this charge at which the learned Judge arrives rests upon the supposition that the entries were made by these insolvents early in 1886, at a time when they were in insolvent circumstances, and therefore had reason to suppose that proceedings in insolvency would be taken against them. But the fact, which bears upon the proceedings and which is uncontradicted, is that these books were not in the possession of the insolvents at all. They had been since December 1884 lodged in the Subordinate Judge's Court at Dacca, and there they had remained down to the time when they were produced in this Court under a request from this Court to produce them. That request being dated the 8th September 1888, and having been made under the petition of the insolvents of that very date, it seems to us that this does away with the whole of the reasoning of the learned Judge as to the fictitiousness of these entries, because he assumes, and it must be assumed, and that is the argument before us, that these entries were not made before 1884 when they professed to be made, but in the middle of 1886, and with the view to this insolvency and with a view to conceal the property of the insolvents. And as soon as it appears that the books had not been in their possession at all since the autumn of 1884, and were not produced by them but upon their petition by the Court, it seems to us that that objection and the effect of those entries falls entirely to the ground. Then it seems to me to come to this, that this case shows, as clearly as anything can show, how necessary it is that a law of this kind, the intention of which is to punish people, should be administered as the Criminal law is administered; that is to say, specific offences should be charged against people, not technically specific in the sense of a specific form of indictment, but that the Judge and the insolvent and every one else should know what offence the man is being tried for, and that the evidence should be directed to the proof of that offence, so that the accused person may be in a position to produce the evidence, if he has got any, to rebut the charge of that offence, and that the Judge, who has to try the case, should specifically find what offence the insolvent has been guilty of, and in his judgment, and in his order, and in the warrant, it should appear what the man has done. In this particular case the judgment shows that the Judge was not convicting the insolvents of any specific offence, but the latter portion of his judgment shews, to my mind, pretty clearly what his view of the case was. What he says is: 'Then comes the question: What I ought to do? I have considered this question with great anxiety. This is certainly the most fraudulent commercial case I have seen since 1 have been sitting as Commissioner of this Court. These people have made away with large sums of money. They have brought in their books after long delay. In the interests of commercial morality I must deal severely with the case.' That shews to my mind, as clearly as anything can show, that the Judge was dealing with this case upon general grounds: on the ground that he considered it a fraudulent commercial case, and the insolvents had made away with large sums of money; but not on the ground that he had convicted them on any legal evidence of either of the offences specified.

6. For these reasons I am of opinion that the order committing these persons to jail was wrong, and that order must be quashed and the two insolvents must be released at once.

Pigot, J.

7. I am of the same opinion. I wish to observe, in addition to what has fallen from the Chief Justice, that, the conviction, so to call it, and the warrant under which the insolvents have been committed, includes, amongst the offences for which they have been committed, an offence not contained in Section 50 at all, but contained in Section 51, the sanction of which is of a totally different kind to that prescribed in the penal Section 50. The offence is that the insolvents vexatiously and frivolously defended certain suits, and the order states: And it appearing to the Court that the said insolvents have fraudulently, with intent to defeat the objects of 11 and 12 Vic, chap. 21, made false entries in their books of account and have fraudulently, with intent of diminishing the sum to be divided among their creditors, transferred or made away with and mortgaged their properties, and have put their creditors, that is to say, Bhagoban Chunder Roy, Bhoyrub Chunder Roy, Juggut Chunder Roy, Suruth Chunder Boy, Protap Chunder Boy, Harendro Coomar Boy, to unnecessary expense and delay by making vexatious and frivolous defences.' Then follows the order directing that the insolvents are to be imprisoned for a year, and that offence is set out in the warrant. It was, I think, properly argued before us that that alone would invalidate the order. It is impossible upon the face of that to say what portion of the punishment was awarded in respect of the vexatious and frivolous defence of four suits, which is treated as one of the offences for which the insolvents are committed. I would further notice that the order of the 13th April thus states the second offence: 'And have fraudulently, with the intent of diminishing the sum to be divided among their creditors, transferred or made away with and mortgaged their properties.' That is not a definite finding of a definite offence under the Act. It is a compandious finding, and in such a compendious finding there is danger: it does not find which of the alternative offences contemplated has been committed. I refer to it, following up the observations of the Chief Justice. It illustrates the justice of what has fallen from him: that each specific offence should be charged, and a specific finding made with respect to it. I concur in the order which has been made.


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