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The Official Assignee of Bengal Vs. Yokohama Specie Bank Ltd. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1925Cal640,87Ind.Cas.392
AppellantThe Official Assignee of Bengal
RespondentYokohama Specie Bank Ltd.
Cases ReferredIn Tomkins v. Saffery
Excerpt:
- sanderson, c.j.1. this is an appeal by the official assignee from the judgment of my learned brother greaves, j., delivered on the 14th august 1923, whereby ha dismissed an application by the official assignee for an order, that a deed, dated the 14th july 1920, executed by or on behalf of a firm of mogi & co., in favour of the yokohama specie bank, limited, might be declared void and inoperative. the application further was for an account of the bank's dealings with the assets of the insolvents under the said deed, for an order for the payment to the official assignee of the sum found due, for a declaration that the bank was not entitled to retain a sum of rs. 20,000 and for an order for the payment of the said sum to the official assignee.2. the material facts are as follows:messrs......
Judgment:

Sanderson, C.J.

1. This is an appeal by the Official Assignee from the judgment of my learned brother Greaves, J., delivered on the 14th August 1923, whereby ha dismissed an application by the Official Assignee for an order, that a deed, dated the 14th July 1920, executed by or on behalf of a firm of Mogi & Co., in favour of the Yokohama Specie Bank, Limited, might be declared void and inoperative. The application further was for an account of the Bank's dealings with the assets of the insolvents under the said deed, for an order for the payment to the Official Assignee of the sum found due, for a declaration that the Bank was not entitled to retain a sum of Rs. 20,000 and for an order for the payment of the said sum to the Official Assignee.

2. The material facts are as follows:

Messrs. Mogi & Co. were a Japanese firm with the Head Office in Japan, carrying on business in Calcutta and Bombay, and in other parts of the world. It appears from the evidence of the. Sub-Manager of the Yokohama Specie Bank in Calcutta that in February and March 1920 there were strong rumours about the financial instability of Messrs. Mogi & Co., and in June 1920 the Calcutta Branch of Mogi & Co., was closed and the Manager of the Branch went to Japan, Mogi & Co., were at that time indebted to the Calcutta Branch of the Yokohama Specie Bank 'to the extent of about Rs. 1,38,000. On the 28th June 1920, Messrs. Curlender & Co., instituted a suit against Mogi & Co., in this Court, claiming Rs. 1,84,000 as damages for alleged breaches of certain contracts made by Messrs. Mogi & Co. An order was made by this Court at the instance of Messrs. Curlender & Co., for the attachment of Mogi & Co.'s assets at Bombay and on the 28th September 1920 certain assets belonging to Messrs. Mogi & Co. at Bombay were attached in accordance with the order. In October 1920 the Yokohama Specie Bank made an application in the Bombay Small Cause Court to set aside the attachment on the ground that Messrs. Mogi & Co. had executed a deed, dated 14th July 1920, whereby they had hypothecated the assets, which had been attached, in favour of the Bank, in pursuance of which the Bank had entered into possession. The assets consequently were released from attachment. On the 22nd November 1920 the Bombay office of Messrs. Mogi & Co. was closed. On the 10th February 1921, Messrs. Mogi & Co. were adjudicated insolvents upon the petition of Curlender & Co. At the date of the deed, viz., 14th July 1920, Mogi & Co. were indebted to the Bombay Branch of the Yokohama Specie Bank to the extent of about Rs. 3,76,000 and at the date of the insolvency viz., 10th February 1921, to the extent of about Rs. 2,75,000. Notice of the application, which gave rise to these proceedings, was dated the 28th May 1923. This Court was informed by the Official Assignee that Messrs. Curlender & Co. had made a claim in the insolvency of Mogi & Co. for the amount of the damages claimed in respect of the alleged breaches of the above-mentioned contracts and one or two other creditors had sent in their claims. The Official Assignee informed the Court that he had not up to the hearing of the appeal admitted any claim-in fact no steps had been taken beyond the above-mentioned application, as the Official Assignee could not ascertain that there were any assets in India except those which are the subject-matter of this application. He, however, stated that he had examined the claim of Curlender & Co. and was prepared to admit it, and I understand that he in fact signed the claim as being admitted during the hearing of the appeal.

3. This application, which is now under consideration, was made under Section 55 of the Presidency Towns Insolvency Act, 1909.

4. This section provides as follows:

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.

5. The learned Judge came to the conclusion that the Bank had shown that the transfer of property involved in the deed of 14th July 1920 was made in good faith and for valuable consideration and that it was not void against the Official Assignee. Consequently he dismissed the application. In this Court it was argued on behalf of the Appellant that the transfer of property involved in the deed of 14th July 1920 constituted an act of insolvency and that the Bank was fully aware of the insolvency of Mogi & Co., at the time the deed was execrated. Under these circumstances, it was urged that the transfer could not be considered as having been made in good faith and for valuable consideration within the meaning of Section 55 of the Presidency Towns Insolvency Act. On the other hand, it was argued on behalf of the Respondents that the transaction was for valuable consideration by reason of the advances which had been made by the Bank to Mogi & Co., that it was made honestly inasmuch as the Bombay Branch of the Bank had no reason to think that Mogi & Co., were in financial straits at the time the deed was executed, that even if the transfer amounted to a preference of the Bank over the other creditors, it should not be deemed fraudulent inasmuch as Mogi & Co., were not adjudicated insolvent within three months after the date of the deed: and reference was made to the provisions of Section 56 of the Presidency Towns Insolvency Act. In my judgment; the Bank must have known in July 1920 that Messrs. Mogi & Co. were insolvent.

6. I have already mentioned that there were rumours in Calcutta as to the financial instability of Mogi & Co., in February or March 1920. In June 1920 the Calcutta office of Mogi & Co., was closed and the Manager went to Japan, leaving a large overdraft at the Bank.

7. It would be unreasonable to assume that those in control of the Yokohama Specie Bank at Bombay were not made acquainted with this fact. In my opinion they must have known of it. In July 1920 the Bank at Bombay demanded payment of the overdraft which amounted to about Rs. 3,76,000. They were aware, as appears from the affidavit of Elizo Wakabayashi, the Accountant of the Bombay Bank, that Mogi & Co., could not meet this liability.

8. In my opinion, the evidence shows that the Bank succeeded in obtaining a pledge of all the available assets of Mogi & Co., at Bombay. Apparently Mogi & Co., had two warehouses and an office at Bombay. By the deed of the 14th July 1920. Mogi & Co., pledged to the Bank all the goods lying in the two warehouses and the goods which were lying in Port Trust Warehouse. In addition to this security the Bank obtained a pledge of all the goods, furniture articles and things lying in the office shop and godown at 178 to 182, Jackeria Musjid Road. The Bank on the 14th July 1920 placed its representative in possession of these premises and a notice was put up that the Yokohama Specie Bank as mortgaged was in possession. It is to be noted that the security was for Rs. 50,000 and for other moneys then due or which might thereafter become due, but there was no contemporaneous advance, nor was there any undertaking to make any advances in the future, with a view to assisting Mogi & Co., in the carrying on of their business. The deed of 14th July 1920 provided that the Bank's representative should enter into possession and that Mogi & Co., should obtain the previous permission of the Bank before they sold any of the goods and should pay the prices received from the purchasers to the Bank's representative. What happened in fact after the deed of 14th July 1920 is clear from the account which has been exhibited and from the evidence in the case. The goods were sold from time to time, the proceeds were paid to the Bank, and the amounts were credited to the account of Mogi & Co. Two sums of Rs. 3,500 and Rs. 3,700 were debited to the account of Mogi & Co. which appeared to have been on account of customs. It was not seriously disputed that these payments were made for the purpose of obtaining delivery of goods from the customs, in order that they might be sold, and the proceeds paid to the Bank. There was another small sum, viz., Rs. 422-14 debited to the account which apparently was a payment to Haridas & Co., as to which no evidence appears, and a further sum of Rs. 3,950 in respect of an unpaid cheque, the amount of which appears on the credit side. It is obvious, therefore, that after 14th July 1920 Mogi & Co., were not carrying on their business in the ordinary way. It appears beyond doubt that after the Bank entered into possession, the goods were sold, and the proceeds were paid to the Bank with a view to paying off the Bank's debt; in effect the business was carried on merely for the purpose of realising the security, given to the Bank, and repaying the Bank as far as the proceeds of the sales would provide. In fact the Bank's debt appears to have been reduced by these means from about Rs. 3,76,000 in July 1920 to about Rs. 2,17,000 in June 1921.

9. It appears that Mogi & Co's Bank in Japan had suspended payment and that the firm in Japan was in difficulties though it was stated in a letter sent to Messrs. Curlender & Co.'s solicitors in August 1920 by Mogi & Co.'s solicitors that it was hoped the difficulties were only temporary. There is no evidence as to the exact position of the firm in Japan, though it appears that in 1922 a body called ' The Re-Adjustment Committee of Mogi & Co.,' consisting of the representatives of certain Banks, had the affairs of Mogi & Co. in hand.

10. In view of the evidence I am of the opinion that the Bank must have known in July 1920 that Mogi & Co. were in serious financial straits, that they could not pay their debts as they became due and that they were in fact insolvent. The Bank therefore determining to obtain, and succeeded in obtaining, control over all the available assets in India of Mogi & Co. This was achieved by the deed of the 14th July 1920.

11. Those in control of Mogi & Co.'s business at Bombay must have known that they were insolvent. They pledged the whole of the assets which were available in India to the Bank; they obtained no further advances to enable them to carry on the business at Bombay; they obtained no undertaking from the Bank, express or implied, to make any further advances to enable them to carry on their business. They had nothing left with which they could carry on their business, and they had no prospect of carrying on their business farther. In point of fact the firm in Bombay was closed in November 1920; the debt due to the Bank at that time had been reduced by means of the realisations to about Rs. 3,13,000. In my opinion the Bank must have known that the assignment of July 1920 would defeat or delay the other creditors in India of Mogi & Co. The Bank by that dead succeeded in obtaining control of substantially all the assets of Mogi & Co. in India; Mogi & Co. in Japan were in difficulties owing to the suspension of their Bank; what possible prospect was there of any creditor in India having his debt or any part thereof paid by Mogi & Co.?

12. Judging from the letter of 10th July 1920 from Mogi & Co., Bombay, to Cur-lender & Co., Calcutta, written only 4 days before the assignment to the Bank, it appears that a representative of Mogi & Co. had recently seen Messrs. Curlender & Co. with reference to their claim, which Curlender & Co. must have boon pressing at that time. Their suit had been instituted on the 28th June 1920 and an order for substituted service was made on the 26th July 1920. The dates are significant; and, in my opinion, it is not unreasonable to assume that the Bank at Bombay as well as Mogi & Co. knew of the institution of Curlender & Co.'s suit in Calcutta as alleged by Curlender & Co. If this be so, they must have realised that if they were going to obtain control of Mogi & Co.'s assets it was time for them to do so.

13. There is no doubt that Mogi & Co. were adjudged insolvent within two years of the deed of 14th July 1920; and, the question therefore arises whether on the facts of the case the Court should hold that the transfer of property, created by the deed of 14th July 1920, was made in good faith and for valuable consideration within the meaning of Section 55 of the Presidency Towns Insolvency Act.

14. It has not been disputed that the onus of proving that the transfer was in good faith and for valuable consideration was on the Bank.

15. The learned Judge has found that the Bank discharged that onus.

16. With much respect to the learned Judge I do not hold the same opinion.

17. This is not a case in which the decision of the learned Judge depended upon oral evidence-the evidence is contained in affidavits, and therefore this Court is in as good a position to judge of the facts as the learned Judge was.

18. Indeed there is little dispute as to the facts; the question really depends upon the inference which should be drawn from the facts of the case.

19. In Khoo Kwat Siew v. Wooi Talk Hwat (1891) 19 Cal. 223, Lord Hobhouse stated the well-known rule of law as follows at p. 231:

The well-known rule of law is that if a trader assigns all his property, except on some substantial contemporaneous payment, or some substantial undertaking to make payment in future, that is an act of bankruptcy and is void against the creditors and the assignee, simply because nothing is left with which to carry on his business, whereas if he receives substantial assistance, Homo thing is left to carry on the business.

20. This statement of the law was made before the passing of the Presidency Towns Insolvency Act of 1909, but I have no doubt that the rule as stated by Lord Hobhouse prevails at the present time.

21. In this case Mogi & Co. assigned all the assets, which were available in India, to the Bank. They obtained no contemporaneous payment or any undertaking to make any payment in future to enable them to. carry on their business, and, as already stated, I can arrive at no other conclusion except that the deed of 14th July 1920 was executed to enable the Bank to realise all the assets of Mogi & Co. which were available, both parties knowing that there was nothing left with which the business of Mogi & Co. could be carried on and that there was no prospect of the other creditors of the firm being paid any part of their debts.

In considering whether the transfer involved in the deed of 14th July 1920 was made in good faith and for valuable consideration within the meaning of Section 65 of the Presidency Towns Insolvency Act, 1909, it is not possible, in my judgment, to leave out of consideration the insolvency of Messrs. Mogi & Co. and the law which applies in an insolvency, and the question is whether the transaction is one which the law will allow.

22. If there were no question of insolvency involved, and the law relating to insolvency had not to be considered, it might be possible to hold that the transfer was made in good faith and for valuable consideration.

23. In this case, however, Messrs. Mogi & Co. were adjudicated insolvents in February 1921, about seven months after the deed of 14th July 1920 was executed, and, in my judgment, both the Bank and Messrs, Mogi & Co. must have known in July 1920 that if any creditors were to take proceedings, the adjudication of Mogi & Co. as insolvents would be inevitable.

24. Having regard to these facts, in my judgment, the transaction is one which the law relating to insolvency does no) permit and the Court ought not to hold that the transfer of property, created by the deed of 14th July 1920, was made in good faith and for valuable consideration within the meaning of Section 55. Consequently, in my opinion, She deed was void as against the Official Assignee. The result is that, in my judgment, this appeal must be allowed, the decision of the learned Judge must be set aside, and a declaration must be made that the deed is void as against the Official Assignee.

25. There will be order as prayed in para (b) of the petition.

26. The Court expresses no opinion as to the sum of Rs. 20,000 mentioned in para. (c) of the petition as we are not in possession of sufficient materials to deal with it. This matter should be investigated in the taking of the accounts: liberty to apply to the learned Judge taking insolvency matters.

27. The Respondents must pay the Appellant's costs in respect of the appeal and in respect of the proceedings before the learned Judge on the Original Side.

Buckland, J.

28. The question involved in this appeal concerns the right of the Official Assignee to certain assets in the hands of the Respondent Bunk as assignee of Mogi & Co., insolvents. Mogi & Co. were Japanese traders who carried on business among other places at Bombay and in Calcutta. In the month of June 1920 they closed their business in Calcutta owing the local branch of the Respondent Bank the sum of Rs. 1,38,100. On the 14th July they executed an assignment in favour of the Respondent Bank of goods and office furniture in Bombay as security for money due and for future advances and put the Bank in possession. Subsequently the Bank realised various sums on the goods purporting so to have been hypothecated to them which they placed against the insolvents' overdraft. On the 22nd November Mogi & Co. closed their office in Bombay owing the local branch of the Respondent Bank a sum of about three lakhs of rupees. On the 10th February 1921 Mogi & Co. were adjudicated insolvents in Calcutta on the petition of Curlender & Co. who claim to be creditors for the sum of Rs. 1,84,000. On that date they owed Rs. 2,75, 427-6-6 to the Bank in Bombay.

29. The Official Assignee now claims that the monies realised by the Bank should be available to the creditors of the insovents on the ground that the instrument of the 14th July 1920 is void under Section 55 of the Presidency Towns Insolvency Act, 1909.

30. It is alleged that the goods hypothecated comprised in effect the whole of the insolvents' available assets, that there was neither any promise to make further advances nor were any further advances made in fact.

31. My learned brother Mr. Justice Greaves has held that the burden of showing that the transfer was made in good faith and for valuable consideration lay upon the Bank and that the Bank has discharged it. He observed that there was nothing to show that all the property of the insolvents was hypothecated.

32. These findings of fact have been challenged on appeal.

33. It will be convenient first to consider the evidence as to the allegation that all the property of the insolvents was hypothecated, for unless this is established it is conceded that the appeal must fail.

34. The instrument of the 14th July specifies:

The goods lying at this data in our warehouse in Building Nos. 361 to 369 situated in Jakeria Musjid otherwise known as Bhuj Moholla and also Port Trust Warehouse as per list herewith.

The goods lying at this date in our warehouse at Chinch Bunder Road on the ground floor of the house No. 18 as per list herewith.

The goods, furniture, articles and things lying in our office, shop and godown at Nos. 178 to 182, Jackeria Musjid Road, as per list herewith.

35. In order to appreciate how some of the evidence to which I shall refer is to be found on the record, it is necessary to state that Curlender & Co. instituted on the 28th June 1920 a suit in this Court to recover the sum which they alleged to be due to them.

36. On the 27th August 1920 an order was made for attachment before judgment whereupon certain goods were attached by the Court of Small Causes in Bombay. The Respondent Bank applied to have the attachment removed on the ground that it was in the position of mortgagee in possession. In the course of such proceedings evidence was taken and has been imported as evidence into these proceedings.

37. In June 1922, Jumukichi Yamamoto, the Sub-Manager of the Bank in Calcutta, was examined before the Registrar in Insolvency. In the course of his deposition he said that in February or March 1920, there were rumours about Mogi & Co. and his Bank became cautious how it dealt with them.

38. As we know the insolvents left Calcutta in June leaving a considerable over-draft at the local branch of the Bank, it is incredible that the circumstances were not communicated to the Bombay branch.

39. The Accountant of the Bank in Bombay has made an affidavit in which he says, among other things, that in July Mogi & Co. were not in a position to pay their debt to the Bank and asked for time and offered to pledge the goods covered by the instrument impugned.

40. That the insolvents had only the goods contained in the warehouses specified appears from the evidence of Toyokachi Hasegawo in the Bombay Small Cause Court where he said that on the 17th July the Bank sent their representative to take possession of goods in their office and shop; and in answer to a question by the Court particularised two godowns about 5 or 10 minutes' walk from the office.

41. There is no oral evidence that the insolvents had any property other than that comprised in the document, and so far as appears from the record no desire or attempt to produce any such evidence was expressed or made.

42. Turning to such documentary evidence as is available it appears that on the 20th August 1920 when Curlender & Co. were pressing Mogi & Co., the Manager of Mogi & Co. in Bombay instructed his solicitors to write to Curlender & Co.'s solicitors in the hope of inducing the latter to persuade their clients to stay their hands. The letter says that:

Mr. Okhura informs us he has had express instructions to carry on the business with a view to effecting a settlement of all claims as soon as finances have been arranged in Japan; the temporary difficulties in which the firm finds themselves being due to the suspension of their Bank in Japan.

43. This makes it clear that the Respondent Bank did not intend further to finance Mogi & Co. The letter adds that all these (silver and other goods) stocks are under lien to Banks, which excludes the existence of unhypothecated goods and there is no suggestion that any Bank other than the Respondent Bank was interested, were it material to enquire.

44. A subsequent letter dated the 23rd August, similarly addressed, emphasises though it does not add to the information. The statement that Mogi & Co. were not in a position to furnish security can only mean that they had no goods which they had not already hypothecated.

45. After the Bank had entered into possession it made some advances to the insolvents which were debited to the latter's account, but these were only for the purpose of enabling them to clear and realise the goods in the Port Trust Warehouse. This appears from details given in the accounts and from a statement in the affidavit of the Sub-Manager of the Bank in Calcutta. There is no evidence whatever of any advance made for the purpose of enabling the insolvents to carry on their business, nor, indeed, is there any evidence that the Bank promised to make such advances, and the transfer contains no such stipulation,

46. Upon the evidence I think it is clear that Mogi & Co. purported to and did hypothecate all their available property to the Bank. The learned Judge seems to have been impressed by the subsequent advances, but as I read the evidence those were made solely for the purpose of enabling the Bank to realise so much of their security as without money could not be realised at all, and were not advances upon which the Bank can rely for the purpose of putting a favourable complexion upon the transaction and defeating the claim of the Official Assignee.

47. Had the learned Judge taken the same view of the facts it is possible that he would have decided in favour of the Appellant, for he appreciated that the case must depend upon Section 55 of the Act. His observation that a good deal of confusion has arisen by seeking to import into the provisions of Section 55 considerations which would arise were the application made under Section 56 indicates that the case was argued before him, as here, that if once it could be shown that the facts established that which would have been a preference within Section 56, it necessarily followed that it was within Section 55.

48. It may be that facts, which would justify an order under Section 56, were the circumstances otherwise appropriate for such an order to be made; are facts which would bring a case within Section 55, but this appeal must be decided upon the words of Section 55. Over and over again has it been enunciated that all that Courts have to do is to construe or apply the words of the statute and all that we need do is to decide whether or not the transfer impugned was made in good faith for valuable consideration.

49. Though a considerable number of authorities were cited in the course of the argument I do not think that I need refer to more than a very limited number.

50. In Khoo Kwat Siew v. Wooi Taik Hwat (1891) 19 Cal. 223, Lord Hobhouse stated the rule as follows:

The well-known rule of law is, that if a trader assigns all his property, except on some substantial contemporaneous payment, or some substantial undertaking to make payment in future, that is an act of bankruptcy and is void against the creditors and the assignee, simply because nothing is left with which to carry on his business, where as if he receives substantial assistance something is left to carry on the business.

51. We have not to consider whether Mogi & Co. were guilty of an act of bankruptcy as such, but whether, as observed, the transfer was made in good faith and for valuable consideration. Had other circumstances, e.g., the period which elapsed between the transfer and the order for adjudication, admitted of an application under Section 56, there can be no question that, notwithstanding the proviso to the section, the transaction must have been held to have been within that section. The further question then arises whether such a transaction can be said to have been entered into in good faith and for valuable consideration so as not to offend against Section 55. In Exparte Chaplin (1884) L.R. 26 Ch. D. 319, Cotton, L.J., observed:

Still, in my opinion, if persons will take from a man who is in difficulties a deed of this description, which has the effect of withdrawing, and is intended to withdraw, all the property of the debtor from the legal process which his creditors have a right to enforce against him, and bankruptcy ensue?, the deed is void under the bankruptcy law. It is fraudulent as well as void, whatever may have been the view of those who were engaged in the transaction that it might be the best thing for the debtor, or that it might afford an effectual way of paying the creditors.

52. This is more general in its application, and it carries the matter a stage further.

53. In Tomkins v. Saffery (1870) 3 A.C. 213, Lord Black-burn had occasion to consider the meaning of the words 'in good faith and for valuable consideration,' used in the proviso to Section 92 of the Bankruptcy Act, 1869 which deals with fraudulent preferences.

54. I will pause here to refer again to Lord Hobhouse's judgment in which in the paragraph immediately preceding that which I have already quoted he deals with the use of the word 'fraudulent' in this connection. His Lordship said:

It is better not to use the term 'fraudulent' in such a case, though that term has, by rather an unhappy use of language, been applied by Courts of equity to transactions which are not at all dishonest in their nature, but are only such as the law will not allow. In this case there is no suggestion from beginning to end of there being anything dishonest in the transaction. The sole question is as to its legal validity.

55. From this and from a passage in Lord Blackburn's speech I infer the principle which is to be found running through all the authorities that in considering the effect of a transaction of this nature the facts must be considered in the light of the law of bankruptcy, the object of which is to ensure rateable distribution of an insolvent's property among his creditors. A transaction therefore which may in other circumstances be free from all taint becomes an offence when it is established that it contravenes the law of bankruptcy.

56. This is what I think Lord Blackburn had in mind when he said:

It comes round to this, that I think (I am stating it in my own words, but it is very nearly what the Lord Chancellor has already said) that when they knew that the man was insolvent and unable to pay his debts, when they knew that this money was given them to prefer a particular body of creditors to all the other creditors, if there were others, they were then fixed with the knowledge of an infringement of the statute, and although they were told by the man who afterwards became a bankrupt that he had no other creditors, they cannot get out of it; they took their chance. If he had told them the truth, and there had been in fact no other creditors, this transaction would have stood and been perfectly good; if he had any other creditors it would not stand. They knew all that it was necessary for them to know, and I think they took their chance, and they must take the consequences.

57. Applying this principle to the facts before us the conclusion at which I have arrived is that the Bank was well aware of the financial difficulties in which Mogi & Co., were involved and that the Bank took the security in order to protect itself in the event of insolvency supervening. There can be no question on the evidence that the Bank desired to protect itself against Curlender & Co., and we have been informed by the Official Assignee that no other claims have been admitted.

58. I have already stated my reasons for the conclusion that the insolvents' entire property was hypothecated to the Bank. It is a fair inference that the Bank was aware that the insolvents had no other property--otherwise no doubt the Bank would have taken steps to include it in the instrument, peeing that after all the goods in the Port Trust Warehouse had been sold there was still a deficit of over 2 lakhs of rupees. In this it may also be presumed that Mogi & Co., would have assisted them had it been in their power to do so, for one may at all events credit them with a desire to continue their business if their financial difficulties could be surmounted.

59. Though the Bank may have acted honestly in the popular sense they cannot be deemed to have acted in good faith within the law of Insolvency however honestly they may have endeavoured and thought they were justified in endeavouring to secure the property of the insolvents as security for their own debt.

60. As Lord Blackburn observed with regard to valuable consideration.:'Yes we must, I suppose, take it that they are so (payees for valuable consideration) but ' in good faith.' So should I answer the question here as regards valuable consideration, but in my judgment a transaction effected in circumstances surrounding the transaction assailed in these proceedings cannot be deemed to have been effected in good faith and must be declared to be void against the Official Assignee.

61. I agree that the appeal should be allowed and concur in the order to be made.


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