Lancelot Sanderson, C.J.
1. This is an appeal by Madhoram Raghumull against an order which was made by my learned brother Mr. Justice Greaves on the 13th of June 1922, by which he declared that two assignments dated respectively the 2nd of March 1921 and the 29th of June 1921 were void as against the Official, Assignee under the provisions of Section 56 of the Presidency Towns Insolvency Act. The appellants have appealed against that order, and it is necessary to state a few facts, about which there is no dispute.
2. The insolvents were Surajmull and Mongalchand. They traded under the name of Puran Chand Hurruck Chand. They were adjudicated insolvents at the instance of a creditor on the 15th of March 1921. On the 2nd March 1921, thirteen days before the adjudication, Surajmull and Mongalchand by a deed of assignment assigned to Raghunath Das Sewlal, a firm of traders in Calcutta who were creditors of the insolvents, certain outstanding debts which were alleged to be owing to the insolvent firm of Puran Chand Hurruck Chand. The debts are set out in the schedule to the deed, and amounted roughly speaking to about Rs. 60,800. The proprietors of the firm of Raghunath Das Sewlal is Ramlal Pachisia. On the 29th of June 1921, Ramlal Pachisia assigned the outstanding debts, which had been assigned to him by the insolvent firm, to the appellants for the consideration of Rs. 30,000. A creditor, one Kissen Chand Banthia, who was the adjudicating creditor, had taken steps challenging the assignment from the insolvent firm to Ramlal Pachisia: and, on the 3rd May 1921 the Official Assignee wrote to Ramlal Pachisia for inspection of the assignment to him. On the 20th of June, according to the affidavit which was before the learned Judge, Ramlal Pachisia appeared before the Registrar in Insolvency and applied for a week's adjournment to enable him to produce the deed of assignment as the same was with the munim gomastha who was then in his native village and absent from Calcutta. The result was that a week's time was granted to him. That week's time expired on the 27th of June, and, on the 27th of June he appeared again and asked for further time until the 29th of June, and that time was granted by the Registrar in Insolvency. On the 1st of July Ramlal Pachisia appeared before the Registrar in Insolvency and said that he was unable to produce the deed of assignment to him, inasmuch as he had on the 29th of June assigned' his right, title and interest under the assignment of the 2nd of. March to the appellants for the sum of Rs. 30,000. Then certain parties were examined under Section 36 of the Presidency Towns Insolvency Act before the Registrar in Insolvency and, in order of date, Ramlal Pachisia was examined on the 1st of July 1921, Mongalchand, who was one of the insolvents, was examined on the 8th of August 1921; then one of the partners in the appellants' firm, Raghumull, was examined on the. 1st of September; then Gopaldas Modi, another partner in the appellants' firm, was examined on the 19th of January 1922, and, Nathmull, another partner in the appellants firm, was examined on the 20th of February 1922; and, on the 4th of April, the Official Assignee made the application to the learned Judge, who was taking insolvency matters on the Original Side, in respect of which my learned brother's judgment was passed.
3. The application was as follows: 'Take notice that on the 1st day of May 1922...an application will be made...for an order that 'the original deed of assignment of ail debts due to the insolvents...and executed by them in favour of...Raghunath Das Sewlal on the 2nd day of March 1921 as also the original deed of assignment executed by.
4. Raghunath Das Sewlal by which they purported to assign their right, title and interest under the aforesaid deed of assignment, dated the 2nd day of March 1921, may be declared fraudulent and void as against the Official Assignee and the same may be delivered over to him or such other order may bemade as to this...Court may seem fit.' The grounds were stated to be, 'Affidavit of Mulchand solemnly affirmed on the 4th day of April 1922 and the proceedings in this matter.' Mulchand was a gomastha employed by Kissen Chand Banthia, the adjudicating creditor. We were informed by the learned Counsel for the Official Assignee that when this application was made to the learned Judge he directed that the Official Assignee should have control of the application. The result of the learned Judge's judgment was, as I have already stated, to set aside both these assignments as being fraudulent and void within the meaning of Section 56 of the Presidency Towns Insolvency Act.
5. In the first place it was stated that there was some doubt as to whether the learned Judge had jurisdiction to deal with the application when it was made in the form which I have described. The learned Counsel appearing for the appellants stated that he did not wish to argue that the learned Judge had no jurisdiction, on this occasion. Inasmuch as the learned Counsel stated that there was some doubt about it, in my judgment it is advisable to set that doubt at rest. In my judgment the learned Judge clearly had jurisdiction to deal with this application render Section 56 of the Presidency Towns Insolvency Act: and, the only further question upon this part of the case, is whether the learned Judge was entitled to act upon the evidence which was before him.
6. Now, as to this, the first point raised was that the learned Judge ought not to have admitted or considered the deposition of the insolvent Mongalchand (the deposition which the insolvent made before the Registrar in Insolvency) as against the appellants: and, the same point was taken by the learned Counsel who appeared for Raghunath Das Sewlal the firm of which Ramlal Pachisia is the proprietor, and who are respondents to this appeal.
7. I do not think it necessary to give any decision upon that part of the case, because I am of opinion that it is clear from the learned Judge's judgment that in arriving at the decision at which he did, he relied upon evidence which was independent of the deposition of the insolvent and, further because I personally do not intend to rely upon the evidence of the insolvent in my judgment when I deal with the facts of this case. As at present advised, however, I am of the opinion that the deposition of the insolvent was not admissible as evidence against the appellants or Pachisia, but I do not decide this point and I leave that question open if it ever becomes necessary to decide it on another occasion.
8. The next point, which was urged by the learned Counsel for Ramlal Pachisia, was that the deposition of Ramlal Pachisia before the Registrar in Insolvency was not admissible against his client Ramlal Pachisia, I think he was constrained to admit in the end that that was admissible if it amounted to an admission by his client Ramlal Pachisia. In my opinion it was admissible: in the first place, because his evidence in my judgment, taking it altogether, practically amounted to an admission that he knew he was obtaining a fraudulent preference in his favour over the other creditors of the insolvent; in the second place in any event it was admissible for the purpose of showing the circumstances in which he took the assignment from the insolvent.
9. The learned Counsel said that it was desirable that the practice of this Court should be laid down clearly. In my judgment the practice, which is adopted in England with regard to an application of this kind, should be followed. If the Official Assignee has to apply to the learned Judge for the purpose of setting aside an assignment, as in this case, on the ground that it was fraudulent and void within the meaning of Section 56 and he intends to rely upon depositions which have been made by parties before the Registrar in Insolvency at an enquiry held under Section 36 of the Presidency Towns Insolvency Act, he should give notice to the opposite parties of his intention so to do. It will then be open to the opposite parties, if they so desire, to get copies of the depositions of which notice has been given. It is to be noted that in effect such notice was given in this case, inasmuch as the grounds of the application included not only the affidavit of Mulchand but also 'the proceedings in this matter.' In my judgment, however, the notice should been a more definite form, and the applicant should specify in such notice the depositions taken before the Registrar in Insolvency, on which he intends to rely.
10. I have dealt with the question of the learned Judge's jurisdiction and of the procedure to be followed upon such an application as this; I now propose to deal with the merits of the case.
11. The first question that arises is whether the learned Judge's judgment as to the transaction between the insolvent and Ramlal Pachisia is correct. The learned Judge said; 'I think it is clear on the evidence of Ramlal Pachisia that the object of the assignment of 2nd March was to obtain a preference over other creditors which is clearly bad and void as against the Official Assignee under the provisions of Section 56.' This matter obviously goes to the root of the case, because if that finding is not correct, then, of course; the appellants have no case to answer, because, if the assignment from the insolvents to Ramlal Pachisia stands, it follows that the assignment from Ramlal Pachisia to the appellants also stands.
12. I am of opinion that the learned Judge was fully justified in coming to the conclusion that the assignment of the 2nd March was made with a view and for the purpose of giving Pachisia a preference over the other creditors, and was fraudulent and void within the meaning of Section 56. The material part of that section is as follows: 'Every transfer of property, every payment made...by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the Official Assignee.'
13. Now, there cannot be the smallest doubt on the evidence of Ramlal Pachisia that on the 2nd March 1921 the insolvents were unable to pay their debts as they became due from their own money. Nor is there any doubt that the insolvents were adjudged insolvents within three months after the date of the 2nd of March, and the only question is whether the assignment in this case was made by the insolvent with a view to give the creditor Pachisia preference over the other creditors.
14. The learned Judge referred to certain parts of Ramlal Pachisia's evidence. I desire to refer to the same parts and other pars of his evidence as well:
Q.--When did you first look into your books and find this out?
A.--I do not remember the date. When I heard that the business of the insolvents was about to fail and when I found that they would not pay me my dues in spite of repeated demands I looked into my books.
15. Then later on he was asked,
Q.--Did you ascertain at the time that they were in insolvent circumstances?
A.--I found that out when I demanded the money.
Q.--You satisfied yourself that they were in insolvent circumstances?
A.--When I was demanding money they did not pay me. So my suspicion about their insolvency was aroused and I put pressure on them to re-pay my money but no payment was made and I came to the conclusion that they were unable to pay. Thereupon the question of assignment of the insolvents' outstanding to me was broached by them. They said to me: 'We have no money to pay. We have outstandings due to us; you may take an assignment of them.
16. Further he was asked.
Q.--You also made enquiries from people in the market that Surajmull and Mongalchand were, unable to pay their debts.
A.--There was no occasion for me to enquire. I got tired of sending for my money. There would be rumours in the market if a dealer fails to meet his liabilities.
Q.--You ascertained that the insolvents were unable to pay their debts when they became due.
17. Then later on,
Q--Did you look into their books?
Q.--How was the list prepared which was annexed to the assignment?
A.--The insolvents prepared the list. I never checked it. I was only too glad to get an assignment for what it was worth before other creditors came down.
Q.--Everything was put through as hurriedly as possible?
18. I think those are all the passages to which I need refer.
19. Now, first, with regard to the question of pressure: It is to be noticed that Ramlal Pachisia did not specify in so many words what was the nature of the pressure which he alleged he put upon the insolvents. I take it from his evidence to have been no more than a constant demand for his money. He said that inspite of his repeated demands he could not get any money. In the second place, it is to be noticed that I such pressure, whatever it was, was useless and failed. He says: 'When I was demanding money, they did not pay me. So my suspicion about their insolvency was aroused and I put pressure on them to reply my money, but no payment was made and I came to the conclusion that they were unable to pay.' In my opinion it is I clear that there was no further pressure than mere demands, and when those demands were not complied with, Pachisia came to the conclusion that there was no use pressing any further, and he took an assignment of all the outstanding debts of the insolvents.
20. My learned brother during the course of the argument drew the attention, of the learned Counsel to a passage in Sir George Jessel, M.R.'s judgment in Ex parte Hall, In re Cooper (1876) 19 Ch. D. 580 : 51 L.J. Ch. 556 : 46 L.T. 549 to which I refer for the purpose of illustrating what I mean with regard to pressure. The learned Master of the Rolls said at page 585 Page of 19 Ch. D--[Ed.]: 'Can that delivery of the bills to Brown be said to have been made in consequence of bona fide pressure on the part of the appellant? It is plain that it was the voluntary act of the bankrupt. It appears to me that it would be absurd to call it pressure. A man says to his creditor, I am about to become bankrupt, or I shall stop payment in a week.' The creditor says, Pay me my debt, or I will sue you for it Can that be called bona fide pressure by the creditor? When you consider the matter, it seems to me that it would be absurd so to call it. And that is exactly what occurred in the present case. Of course it would be an entirely different matter if the creditor did not know of the state of his debtor's affairs.' In the present case, there was an admission of Ramlal Pachisia that he satisfied himself that, the assignors were in insolvent circumstances, that their business was about to fail and that his repeated demands were of no avail: and, I adopt what was said by the learned Master of the Rolls in the above mentioned case, which in some respects has a considerable likeness to this, that it would be absurd to call what Pachsia did 'bona fide pressure.'
21. Having regard to these facts and to the reasoning adopted by the learned Judge, in my judgment it is clear that, the assignment of the 2nd March 1921 was made with a view to give Ramlal Pachisia a preference over the other creditors. Consequently, inasmuch as, the assignment was) made at a time when the insolvents were unable to pay their, debts when they became due, and inasmuch as they were adjudicated insolvents within 13 or 14 days of the assignment, as between the insolvents and Ramlal Pachisia the assignment of the 2nd of March 1921 must be deemed to be fraudulent and void as against the Official Assignee.
22. Then arises the question as to whether the assignment of the 29th June 1921 by Ramlal Pachisia to the appellants can stand.
23. In the first place, in my judgment, there can be no doubt that if the appellants, after it has been established that the assignment by the insolvents to Ramlal Pachisia was fraudulent and void as against the Official Assignee, desired to bring themselves within the provisions of Sub-section (2) of Section 56, the onus lay upon them, the appellants, to show that not only did they give valuable consideration for the assignment but also that they acted in good faith. I rely upon the terms of Sub-section (2) of Section 56, which, in my opinion, make it plain that the onus is upon the appellants: the reason why the onus is laid upon the appellants in the circumstances of this case may be found in the judgment of the Court of Appeal in the case of Ex parte Tate (1876) 35 L.T. 531 : 25 W.R. 52.
24. The next question which arises is whether the appellants have discharged that onus. The learned Counsel Mr. Khaitan for the appellants has urged that the onus has been discharged by reason of the affidavit of Gopaldas Modi, a partner of the appellant firm, which was filed in these proceedings; and he relied principally upon paras. 3 and 6. I will not read both the paragraphs in detail. The main allegations are contained in para. 3 which is, as follows: 'That with reference to para. 7 of the said affidavit I say that my firm wanted to start a business of Commission Agency and for that purpose purchased the outstandings from Raghunath Das Sewlal for the sum of Rs. 30,000, The said amount has been paid by cheque and the factum of payment duly appears in the firm's Cash Book and Bank Pass Book.' The learned Counsel argued that that was the only evidence which the learned Judge was entitled to entertain with regard to this point. In my judgment that argument ought not to be adopted. In my judgment it was open to the Court to consider the depositions of the partners of the appellants' firm for the purpose of ascertaining the circumstances relating to the assignment which they took on the 29th of June 192i, and for the purpose of ascertaining all the facts which are material to that question.
25. With regard to the payment of the Rs. 30,000, the learned Judge has found as fact that that was made. There is evidence that a cheque was drawn by one of the partners of the appellants' firm and that that cheque was debited to the appellants' firm's account in the Central Bank of India. The date of this cheque was the 29th June 1921 and was debited to the appellants' firm's account in the Bank on the 2nd of July. There was some question raised during the examination of Nathmull, one of the partners of the appellants' firm, whether there was sufficient money in the Bank to meet that cheque, and it was suggested in the examination by Mr. Chatterjee that there was only Rs. 12,756 to their credit on the 29th June. The answer was, 'No, the balance was Rs. 44,668. We had the Pass Book before us. It was exhibited at the hearing before the learned Judge. It is obvious from the record of the examination that the above-mentioned question related to the Pass Book. On looking at the Pass Book it appears that there was on the 29th of June 1921, a debit balance of something like Rs. 33,000. Both the learned Counsels are agreed that that is what is shown by the Pass Book itself. How these two sums of Rs. 12,756 and Rs. 44,668 were arrived at by the persons who respectively mentioned these figures, no one was able to explain. The fact remains, however, that a sum of Rs. 30,000 was debited to the appellants' account on the 2nd of July. Though I have some doubt on the matter assume that the payment, by the cheque was a bona fide payment, there still remains the question whether the assignment was taken in good faith. The learned Judge came to the conclusion that it was not. In my judgment, in the evidence of the partners of the appellants' firm, there is ample justification for that finding. Some of the evidence which justifies that finding maybe referred to shortly: in the first place, it appears that when Gopaldas Modi was approached by a man called Gun gad as Bhutter who was a gomastha of Raghunath Sewlal, Gungadas Bhutter informed him that the outstanding debts would amount to about 65 or 66 thousand rupees, that Puran Chand Hurruck Chand had closed their business, had left-Calcutta and had sold their outstanding' debts to Raghunath Sewlal. He, Gopaldas Modi, admitted that that statement was made to him. He further admitted that when his firm took the assignment on the 29th of June, they got no papers, nothing but the assignment and 4 or 5 letters received by Raghunath Das Sewlal in reply to the letters of demand sent by them to the debtors. Beyond that they got no papers at all. He further admitted that he did not know the names of the partners of this firm but that he was told that they had closed their v business. He further stated that he had enquired whether they were insolvents.
Q--You were told that they had closed their business.
Q.--Did you not enquire whether they were insolvents?
A.--I enquired and I was told that they had closed their business and left Calcutta.
26. What can that mean? When the enquiry was whether they were insolvents, and the answer was that they had closed their business and left Calcutta and sold their outstandings to one creditor, the conclusion to which any one would naturally come under the circumstances would be that the firm was insolvent.
27. Then he was asked again.
Q.--What did you enquire?.
A.--I enquired why Puran Chand Hurruck Chand had closed their business and sold the outstandings.
Q.--Why had they closed?
A.--I did not enquire.
Q.--What did you enquire about?
A.--I enquired about the insolvency of the debtors and came to know from two or three commission agents that I would be able to realise the amount from them.
Q.--Did you enquire who the persons were who represented the firm of Puran Chand Hurruck Chand?
28. Again he was asked,
Q.--Did you make any enquiries for the books of account of Puran Chand Hurruck Chand?
29. He was asked again whether he examined the books. He said, 'I did not examine the books. I was busy and I did not think it necessary either to examine the books.'
Q.--You were going to buy the outstandings, why did you not think it necessary to see how much was due?
A.--1 looked into the assignment in favour of Raghunath Das Sewlal and I believed that everything was correct.
Q.--Then I take it that you made no enquiries as to whether the assets were realisable or not?
A.--I simply asked Raghunath Das Sewlal's man as to how much would be realised and what profit I would be able to make.
Q.--Who was the man of whom you made the enquiry?
* * * * *Q.--What step did you take to get possession of the account books for the purpose of realising the outstandings?
A.--Up-to-date I have taken no steps.
Q.--Where are the books?
A.--I have now come to know that they are in the possession of the insolvents.
30. Therefore, it appears that he admitted that he had made certain enquiries but he got no satisfactory answers and that these enquiries were made Sometime about April or May 1921. Puran Chand Hurruck Chand were adjudicated insolvents on the 15th of March 1921, and this assignment of the 29th of June 1921 was taken by the appellants under the circumstances above-mentioned. It seems to me that it is impossible to say that this assignment of the 29th of June 1921 was an assignment taken by the appellants in good faith.
31. There are other matters in the evidence of the appellants which were relied upon by the learned Counsel for the Official Assignee; but, in my judgment, it is not necessary for me to deal with them in detail. It is sufficient for me to say that in view of the admission made by the appellants in their depositions before the Registrar in Insolvency, which, in my opinion, were certainly admissible for the purpose of refuting the statements contained in the affidavit which was put in by one of the appellants, in my judgment, the appellants have not discharged the onus of showing that the assignment of the 29th June 1921 was taken by them in good faith.
32. It was urged oh behalf of the appellants on the question of procedure that injustice or hardship might be experienced by the respondents to an application, if the procedure, which was adopted in this case is followed. I was not impressed by that argument because it appears that the learned Judge gave the learned Counsel who was appearing for the appellants an opportunity or calling evidence if he so desired The evidence in this case on which the judgment was founded, consisted of the depositions of Ramlal Pachisia and the members of the appellant firm. If any of the parties had desired to make any explanation or to give any further evidence in respect of the matters as to which they had been examined before the Registrar in Insolvency they had ample opportunity of so doing.
33. Consequently, in my judgment, the learned Judge's judgment was correct and that this appeal ought to be dismissed.
34. The learned Counsel for the Official Assignee drew our attention to the order which the learned Judge made as regards costs. In the last line of his judgment will be found this direction, 'The, Official Assignee is entitled to the costs of this application including the costs of the examination under Section 36.' The learned Counsel pointed out that the Official Assignee did not conduct the proceedings under Section 36, but that the adjudicating creditor did. In my judgment that order, therefore, ought to be altered, and should run as follows: 'The Official Assignee is entitled to the, costs of this application, and in his capacity of Official Assignee on behalf of the adjudicating creditor to the costs of the examination under Section 36.' With that variation, in my judgment, the learned Judge's judgment and order should be sustained and this appeal dismissed.
35. The appellants' must pay the Official Assignee his costs of this appeal. The other respondents, the firm of Raghunath Das Sewlal will pay their own costs of this appeal.
36. I agree, These proceedings under Section 56 of the Presidency Towns Insolvency Act were commenced by notice pf motion in bankruptcy served on the firm of Raghunath Das Sewlal of which the sole proprietor was Ramlal Pachisia, and on the appellants' firm of Madho Raghumull.
37. The relief prayed for was that the assignment of the insolvent firm of Surajmull Mongalchand, dated 2nd March 1921, in favour of Ramlal Pachisia and the transfer, by the latter on the 29th June 1921, of his right, title and interest under the assignment to the appellants' firm should be declared fraudulent and void as against the Official Assignee.
38. The questions of procedure which have been raised have been dealt with by my Lord and I have nothing to add.
39. As against Ramlal Pachisia his own deposition taken under Section 36 of the Presidency Towns Insolvency Act is clearly admissible in evidence on these proceedings and no other evidence need be considered.
40. It was said that the assignment of 2nd March in his favour was not a preference within the meaning of Section 56 of the Act because it was induced by pressure put upon the insolvent so that he was not a free agent in the matter. The authorities such as Sharp v. Jackson (1899) A.C. 419, 68 L.J.Q.B. 860 : 80 L.T. 841 : 6 Manson 264 show that the word 'preference' imports and involves freedom of choice and that no transfer which is not voluntary in the sense that it is a free act of the insolvent, is a preference which under the Act is to be deemed fraudulent and void as against the Official Assignee. But what did the pressure amount to, which is said to have been exercised in the present case? On his own showing Ramlal Pachisia knew at the time that the insolvent firm could not pay their debts. He admits that he was told what the position of the firm was. Though the exact form which the suggested pressure took is not stated, I may assume that it took the form of a threat of legal proceedings. But in such circumstances such a threat is meaningless and I will not again quote the language of the Master of the Rolls, Sir George Jessel, in Ex parte Hall, In re Cooper (1876) 19 Ch. D. 580 : 51 L.J. Ch. 556 : 46 L.T. 549. I agree with my Lord that there is no pressure shown here which can be described as bona fide pressure by which the members of the insolvent firm were prevented from acting as free agents. In the result, therefore, I agree with the learned Judge that the assignment in favour of the respondent firm by Ramlal Pachisia must be deemed to be fraudulent and void.
41. As to the appellants' firm, I will not deal with the facts again in detail. We have an assignment by the insolvent firm in favour of a creditor which is found to be a fraudulent preference. Here again, no evidence need be considered as against the members of the appellant firm except their own depositions taken under Section 36. Confining myself to those depositions as they stand, I cannot imagine that any honest business man would have entered into a serious transaction, involving the payment of a sum of Rs. 30,000, without making enquiries which, as the learned Judge observed, these gentlemen deliberately abstained from making. The learned Judge has found, and I am willing to concede, that the sum of Rs. 30,000 was, in fact, paid by a cheque which was cashed at Ramlal Pachisia's Bank. But like the learned Judge, even though this cheque was handed over the counter of the Bank and cashed, I am still far from being convinced that the appellant firm have brought themselves within the protection of Sub-section (2) of Section 56 as persons making title in good faith and for valuable consideration through or under a creditor of the insolvent. We were referred by the learned Counsel to the definition of 'good faith' which appears in Clause (20) of Section 3 of the General Clauses Act of 1897. It is there said that 'A thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not.' But clearly an appeal to that definition begs the whole question which is here in issue. It is thus assumed that the thing here was done honestly. In my opinion, the appellant firm, in the transaction with which we are concerned, did not act honestly or in good faith within the meaning of Section 56, Sub-section (2).
42. The result, therefore, is that I agree with, my Lord that this appeal should be dismissed.