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J.M. Lucas Vs. Official Assignee of Bengal - Court Judgment

LegalCrystal Citation
Decided On
Reported in56Ind.Cas.577
AppellantJ.M. Lucas
RespondentOfficial Assignee of Bengal
presidency towns insolvency act (iii of 1909), part viii, sections 103, 104 - charge, notice of form of charge--prosecution, duty of--'alleged creditor,' undue preference to, whether offence--transfer for valuable consideration--good faith--criminal proceedings, postponement of, to civil proceedings. - him with the official assignee, and (c) with having withheld production of the cash-book or cash-books from 1st may 1909 to 14th february 1912. but the notice did not set forth the substance of any offence regarding these last books, in fact it made no reference to them. this charge, therefore, is not framed in pursuance of the notice and cannot be maintained. so the conviction and sentence under charge (c) must be set aside. charge a is that lucas has purposely withheld the production of the cash-book or cash-books of his business from the 1st july 1896 to the 30th of april 1909; and that he did this fraudulently with intent to conceal the state of his affairs and to defeat the objects of the presidency towns insolvency act.6. these cash-books are not forthcoming and the charge.....

Lawrence Jenkins, C.J.

1. On the 21st February 1912 J. M. Lucas was adjudicated an insolvent on his own petition under the Presidency Towns Insolvency Act, 1909. He was examined as to his conduct, dealings and property, and later, proceedings under Part VIII of the Act were instituted against him.

2. A notice was served on him under Section 104 professing to set forth the substance of certain offences, and calling on him to shew cause why charges should not be framed against him. Nine charges were framed; on three he was acquitted, on six he was convicted and on each of these he was sentenced to rigourous imprisonment for four months. The sentences were directed to run concurrently. From these convictions and sentences Lucas has appealed,

3. The charges fall under two general heads, the withholding and falsifying of books of account, and the making away with property.

4. As it is objected on the part of the appellant that in one important particular the charge does not correspond with the notice, it is necessary to examine the terms of the notice so far as they relate to it. The first charge in the notice is that Lucas withheld the following books, (1) cash and ledger books of the insolvent's business to the end of April 1909, and (2) the ledger bonks from the month of May 1909 to the 14th of February 1912. The second charge is that Lucas kept a false cash-book from the 1st May 1909 to the 14th February 1912, which had been filed by him with the Official Assignee.

5. The other charges as to books contained in the notice call for no mention. The actual charges framed in pursuance of this notice make no mention of the ledgers, but charge Lucas (a) with having withheld production of the cash book or books from 1st July 1896 to the 30th of April 1909, (b) with having kept a false cash-book from 1st May 1909 to the 14th February 1912, being the cash-book filed by him with the Official Assignee, and (c) with having withheld production of the cash-book or cash-books from 1st May 1909 to 14th February 1912. But the notice did not set forth the substance of any offence regarding these last books, in fact it made no reference to them. This charge, therefore, is not framed in pursuance of the notice and cannot be maintained. So the conviction and sentence under charge (C) must be set aside. Charge A is that Lucas has purposely withheld the production of the cash-book or cash-books of his business from the 1st July 1896 to the 30th of April 1909; and that he did this fraudulently with intent to conceal the state of his affairs and to defeat the objects of the Presidency Towns Insolvency Act.

6. These cash-books are not forthcoming and the charge as framed implies that the books still exist and have not been destroyed.

7. There is no evidence that they still exist, and the only evidence before the Court is that they were destroyed in the autumn of 1909. In dealing with this part of the case the learned Judge describes to Lucas a variation in his story as to the destruction of the books; but I do not so read the insolvent's statement. His story is that in the autumn of 1809 the books were burnt because of their condition. It may be a convenient excuse, but it cannot be called an improbable story, and it is, moreover, confirmed to this extent by Mr. Cuyper, his landlord at that time, that he deposes to having seen books burnt by Lucas.

8. The learned Judge regards this witness as most unsatisfactory; this was because his answers were rambling and indefinite, not because he appeared to be deliberately saying what was not true.

9. The record does not disclose the rambling and indefinite character of his answers and I say this after having read his deposition more than once. The learned Judge acquits Mr. Cuyper of the appearance of. deliberate falsehood; absolutely no reason is ' given why be should have deposed falsely, and no suggestion of falsehood was made in the argument before us.

10. Mr. Cuyper says he saw books burnt at a date he is able to fix approximately by reference to the time at which Lucas left the premises and he gives this rate as a month or two before November 19c 9. The learned Judge does not lay this was not true and I see no reason for disbelieving it.

11. The judgment seems to suggest that the calling of Mr. Cuyper was an afterthought but this is not the fact. Throughout Lucas had declared that Mr. Cuyper could confirm this story as to the burning of books in the autumn of 1909.

12. After all said and done, we must rot lose sight of the fact that this is a criminal trial, and that it lies on the prosecution to prove its case beyond readable doubt.

13. To establish that books are being purposely withheld, it must be shewn that they exist. No serious attempt has been made to establish this, but suspicion has been allowed to pose as proof. And in dealing with this charge it must not be forgotten that it relates to books from 1896 to 1909, whereas the insolvency was not till 1912: and nothing has been placed before us that points to any reason for withholding these books if in fact they exist. This has been from no want of effort on the part of those assisting the prosecution, for a most searching enquiry has been made of those with whom Lucas dealt, and Radhakishen Agarwalla has been especially active in rendering assistance, and has naturally brought to bear all the knowledge possessed by him as the insolvent's broker. I hold charge A not proved.

14. Charges E and G have been treated together, and yet they involve considerations that are widely different.

15. The first charges Lucas that he fraudulently with intent to diminish the sum to be divided among his creditors had made away with a stock of shellac of the approximate value of Rs. 6,502-4-9 on or about the end of January or the beginning of February 1912.

16. The second charges Lucas that he on or about the month of January or February 1912 for the purpose of giving undue preference to one of his alleged creditors, to wit, George Edmund Pereiro, made away with a stock of shellac of the approximate value of Rs. 6,502-1.9.

17. Each charge, therefore, relates to the making away with shellac of the same approximate value : each refers to the months of January and February, though, for some reason not explained to us, there is a closer definition of the time in the first than in the second of these two charges. It was conceded in argument that the more precise description of time ought to apply to both charges, and the two charges have been treated as relating to the same shellac.

18. At this point, however, the charges diverge: the first complains that the making away was fraudulent, and that the intention was to diminish the turn to be divided amongst the creditors: the second refrains from alleging that the making away was fraudulent, but charges that it was for the purpose of giving preference to an alleged creditor. Why it was not charged in 9 that the making away was fraudulent was cot explained to us : Section 103 (b) requires it, and without it no offence under the Act is charged. In strictness, therefore, the second of these charges is bad in form. But that is not its only vice. It is only a creditor that can be unduly preferred, and yet Pereiro is only described as an ' alleged' creditor. This is not a verbal criticism, for the Official Assignee has declined to admit Pereiro as a creditor. So that we have this extraordinary position, that we are asked by the Official Assignee to send a man to prieiron for giving an undue preference to a person who according to the Official Assignee is not a creditor. Mr. Avetoom found it difficult to make up his mind whether to press charge E or charge G but he evidently had a preference for the latter though he felt the difficulty that he was unable to say Pereiro had been proved to be a creditor.

19. Nor does this end the catalogue of difficulties in which the Official Assignee has involved himself by failing to keep clearly in view what had to be proved. It is not proved that Lucas made away with any stock of shellac of the approximate value of Rs. 6,502 4 9. The case sought to be made is that the shellac found its way into the hands of Pereiro, and this the prosecution endeavour to make out by placing together a statement of Lucas, letters written by him and railway receipts. But this patchwork of evidence falls wholly short of the required proof: the letters might have been useful as evidence of a fraudulent intention had the transaction,' been proved: Lucas' statements negative the absence of valuable consideration; and of '., the railway receipts, the only one which is connected by evidence with Pereiro and at the same time relates to shellac, is Exhibit Z 2.

20. This connection consists in the fact that the receipt purports to bear Pereiro's signature and Radha Kishen, who professes to know the writing of Pereiro a little, deposes that the signature is his. How he acquired this knowledge does not appear. But treating as sufficient proof of Pereiro's handwriting this statement of Radha Kishen whose familiarity with English did not permit of his giving evidence without the aid of an interpreter, we are not carried much further. This receipt Exhibit Z 2 relates to a consignment of goods, not to Calcutta where Pereiro was, but to Mirzapur with which he is not shown to have had any connection; and the shellac is not of the approximate value of Rs. 6,502 4-9, but is only 3 maunds odd the value of which, we have been told, would be under Rs. 300.

21. There is absolutely nothing to show that the goads came into the possession of Pereiro: if we are to indulge in speculation, then I would be disposed to say that it is more likely that Pereiro had no real connection with the goods bat that the goods were consigned in his benamee name, as the Official Assignee has himself reported.

22. The prosecution for the purpose of this charge have relied largely on a debit entry of Rs. 5,750 in the impugned cash-book C. C. That entry, however, purports to record a payment of Rs. 5,750, and nothing else, and if the entries on the credit side of the account be correct that amount must have been received, as otherwise there would not have been funds sufficient to meet the payments. Yet no endeavour has ever been made to show those payments were not made; on the contrary it is the subject of another charge that one payment, that to Mr. Mangey of Rs. 2,380, was in fact made.

23. It is true that on the credit side of this cash account are shown sums, as for instance, amounts paid to Pereiro, which may arouse suspicion. They might well have been investigated; but they have not, and it would be obviously unfair at this stage for the first time to use them against Lucas without affording him an opportunity of explaining them.

24. Charge H is the really substantial charge in the case, and but for the hope of recovering the property to which it relates, I very much doubt whether these criminal proceedings would have been launched. It avers that Lucas, or about the 26th of September 1911 fraudulently with intent to diminish the sum to be divided amongst his creditors, transferred his properties Nos. 40, 41, 41/1, 41/2 and 42, Elliot Road, into the name of his mother-in-law. The terms in which the transfer is described is suggestive of a benamee transaction, more especially when contrasted with terms of the notice.

25. That a transfer was made the insolvent does not dispute, but he emphatically denies that it was done fraudulently or with the intent charged. The Elliot Road property prior to this transfer belonged to Lucas but he had mortgaged it to the Phoenix Assurance Co., Ld., to secure a present advance of rupees one lac made and further advances to the extent of an additional Rs. 40,000 demandable on the completion of certain buildings.

26. At the date of the transfer Rs. 10,000 of the rupees one lac had been re-paid, but a further sum of Rs. 10,000 had been advanced so that the equity of redemption was still burdened with the indebtedness of rupees one lac. This equity of redemption the insolvent purported to transfer to his mother-in-law Mrs. Zemin on the 26th September 1911.

27. A deed was executed and registered and in form the transfer has been effected.

28. The consideration is expressed to be a sum of Rs. 50,000 and Mrs. Zamin also undertook and has since incurred certain pecuniary obligations.

29. This sum of Rs. 50,000 is said to be made up of Rs. 30,000 paid at the time and a past debt of Rs. 20,000 which was released.

30. The first point to be considered is whether the Rs. 30,000 was paid. It no doubt was a large sum for Mrs. Zemin to possess, but it is proved beyond the possibility of doubt that she possessed it. It represented a legacy of 2,000 left to her.

31. In anticipation of the ' arrival of this sum from England and its investment in the purchase of this property, Messrs. Morgan and Co. had actually prepared the instrument of transfer' which was subsequently executed. Counsel for the prosecution emphatically announced that he made no imputation against this firm of attorneys in this transaction. It is further conclusively proved that Rs. 25,000 of this Rs. 30,000 was paid into Lucas' backing account. But the Official Assignee was not to be defeated by this: he instructed his Counsel to say that this payment of Rs. 25,000 was a blind; that the amount was re-paid to Mrs. Zemin.

32. This is the case that was actually put forward for our acceptance and when I reflect on what has been actually established before us, I am at a loss to understand how the prosecution could have ventured to place such a case before the Court with a view to recuring the conviction of the insolvent on this serious criminal charge.

33. It points to a disregard of materials within the control of the Official Assignee.

34. The Rs. 25,000 is shown to have been paid into the Mercantile Bank: of that there is no doubt, and even Counsel for the prosecution had to admit it.

35. Of this amount a sum of Rs. 10,000 is shown to have been paid by cheque, to M. C. David, a creditor and one of the Official Assignee's own witnesses in this proceeding, A sum of Rs. 2,500 is shown to have been paid to the Mercantile Bank, yet to the last the Official Assignee persisted through his Counsel that this was not' a genuine payment, though he actually had in his possession the hundi which was discharged by it.

36. Mr. James who represented the insolvent assured us this was so: we directed this and certain other hundis to be produced before us and true enough there was the hundi which proved conclusively that the Rs. 2,500 was a genuine payment.

37. Another item was Rs. 10,000 drawn in favour of self: this at any rate the prosecution maintained must have been re-paid to Mrs. Zemin. Here again there was not only a complete absence of proof, but the insolvent asserted before us that the amount was drawn to meet certain hundis now in the Official Assignee's possession. We sent for these hundis and they were brought into Court and completely confirmed what the insolvent had said. These payments were traced beyond all doubt by means of the G. C. Book whose genuineness has not been attacked.

38. By the hundis thus brought before us it was also conclusively proved that the Rs. 5,000 which had not been paid into the Bank had been similarly utilized.

39. In this matter then not only has the Official Assignee failed to prove the serious charge made by him, but it has been abundantly shown that there was no foundation for that charge. He ought to have known this, for he bad in his possession materials which disproved his own case and had he asked the insolvent for an explanation, it would have been forthcoming as readily before him as it was before us. Had these materials been placed before Chitty, J., they could not have failed to influence his opinion on this charge.

40. And now I will deal with the balance of Rs. 20,000 and in dealing with it, it is difficult--I doubt whether it would be right-to forget how baseless the Official Assignee's persistent imputations have been in regard to the Rs. 30,000.

41. This sum of Rs. 20,000 is made up of Rs. 8,000 and Rs. 12,000.

42. It is proved that Mrs. Zemin received a legacy for 500 which was paid her by cheque, and this represents the major part of the Rs. 800. It is shown to have passed into Lucas' account.

43. Lucas declares that this as well as the Rs. 12,000 was paid him by Mrs. Zemin. The instrument of transfer treats Rs. 50,000 as paid, and this is made up of the Rs. 30,000 and Rs. 20,000.

44. It was prepared under the circumstances I have described, and the receipt was witnessed by Mr. R.M. Chatterjee, then of Messrs. Morgan and Co.

45. It is admitted that Mr. Chatterjee would not have been a party to any fraud, but it is argued that if there had been an advance of two separate sums and this had been told to the attorneys there must have been a recital to that effect. But I do not agree with this, and for the purpose of these criminal proceedings I see no sufficient reason for not accepting Lucas' statement, more especially in view of the striking manner in which the accuracy of his statements regarding the Rs. 30,000 has been established. And I would here point to the fact that the Official Assignee's report actually treats the Rs. 20,000 as received from Mrs. Zemin.

46. It is true that Lucas' letters of the 19th January and the 5th February lend some support to the view that he regarded the property as his own. They no doubt create suspicion, but they are susceptible of explanation and I think it is equally pertinent to remark that in the letter of the 13th February he treated himself as a beggar with nothing left.

47. The narative disclosed by Lucas' letters shows that to the last he was fighting strenuously against failure, and I find it difficult to suppose that if he still had the property as his own, he would not have attempted to raise money on it.

48. But yet he never did after the 26th September, There is nothing improbable in his attempting to get money at that date; he was in urgent want of it, and when he got the Rs. 30,000, he had to utilize it in meeting his obligations as I have already shown.

49. At the same time it probably would have imperilled his credit if he had proclaimed abroad his desire to part with this property. This was averted by a sale to Mrs. Zemin.

50. It was true he only got Rs. 30,000 in cash from her, but still that was a substantial sum.

51. I do not forget that the lady was his mother-in law, but she parted with hard cash. There was valuable consideration, and if that was adequate to the occasion, the Court will, in ordinary circumstances, be slow to hold there was no good faith.

52. But if the transfer was in good faith and for valuable consideration, then it would not be liable to avoidance.

53. This brings me to the adequacy of the consideration.

54. We have two valuations by Messrs. Mackintosh Burn and Co, a firm of the highest standing. On the 24th of August they reported that the property could be readily sold for Rs. 1,50,000. On the 24th March 1911 they reported that the property could be readily sold and the amount that might be realized on a forced sale after the building of the two additional houses would be Rs. 1, 90,000.

55. At the date of the transfer these two houses had not been built. The property was then subject to a mortgage of one lac, responsibility for which Mrs. Zemin undertook; she paid Rs. 30,000 in cash; she released a debt of Rs. 20,000; on the 2nd May 1912 she paid the Bengal Stone Company Limited Rs. 28,000 on account of payment for works done at 40, Elliot Road : and on the 12th September 1912 she paid Rs. 3,482 9-0 for plumbing and other work. In addition to this she paid Rs. 1,000 in round figures for flooring and incurred a liability to the Bengal Stone Company for Rs. 10,000. Mr. James also contends that she is entitled to claim Rs. 500 for interest., In confirmation of the assertion that she took over the Bengal Stone Company's debt, there is the fact that this company has not submitted a proof in the insolvency.

56. It is claimed that these several payments and obligations constitute a consideration in excess of Rs. 1, 90,000 and in the circumstances, I am certainly not prepared to hold that the charge in relation to the Elliot Road property is made out.

57. The last charge is that Lucas, on or about the 15th February 19i2 with the purpose of giving undue preference paid to one Mrs. Mangey, alleged to be a creditor, the sum of Rs. 2,380.

58. The circumstances on which this charge is based are assuredly venial, if any contravention of the Insolvency Law merits that description, In fact, the learned Judge declared that, as an offense, it might possibly, if it stood alone, be leniently dealt with, and Counsel for the prosecution recognized the justice of this remark. I therefore, need not labour this point. The charge, as drawn, is now admitted to be bad : fraud is of the essence of this offence, but it is not alleged: to constitute the offense the payment must be to a creditor, even that is not stated as a fact. In the circumstances, I think, we ought not to permit an amendment of the charge at this stage and from this it follows that the conviction and sentence cannot stand,

59. We, therefore, set aside the conviction and sentence on each charge and find the insolvent not guilty and direct his acquittal.

60. Though no invariable rule can be laid down, it is ordinarily undesirable to institute criminal proceedings until determination of civil proceedings in which the same issues are involved. It is too well known to need elaboration that criminal proceedings lend themselves to the unscrupulous application of improper pressure with a view to influencing the course of the civil proceedings, and beyond that there is the mischief illustrated by this case of criminal proceedings being instituted with an imperfect appreciation of the foots where they have not been ascertained in the more searching investigation of a Civil Court.

61. Costs of the insolvent of both the Courts (as of a hearing) will be paid by the Official Assignee out of the estate in his hands. The Official Assignee will retain and pay his own costs (as of a hearing), as between attorney and client, out of the said estate. There will be liberty to apply.

Woodrofff, J.

62. I agree.

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