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Mt. Majidunnisa Bibi vs Babu Puran Chander Roy, Official ...

High Court Of Judicature at Allahabad|30 April, 1941


JUDGMENT Mohammad Ismail, J.
1. This is an application in revision directed against an order of: the learned District Judge of Ghazipur which affirmed an order of the Insolvency Judge of Ghazipur. On 22nd December 1936, one Abdul Hafiz Khan executed a sale deed in favour of his wife Mt. Majidunnissa Bibi who is the applicant before us, for a consideration of Bs. 5000. Out of the sale consideration, Bs. 1600 was left with the vandee for the satisfaction of a mortgage bond. The balance of the sale consideration was set off against part of the dower debt due to the vendee. It has been found by the Courts below that the dower debt was Rs. 14,000. On 29th November 1937 Abdul Hafiz Khan made an application to the insolvency Court to be adjudged an insolvent. On 19th February 1938 the Courtadged him an insolvent and appointed an Official Receiver for the administration of the insolvent's estate. On 6th April 1938 the Official Receiver made an application under Section 53, Insolvency Act, for the avoidance of the transfer made under the sale deed dated 22nd December 1936 in favour of the applicant. The Courts below upon a consideration of evidence and circumstances came to the conclusion that the transfer was not made In good faith and for valuable consideration. It is not disputed that in an application for annulment under Section 53, it is for the Official Receiver to prove that the transfer is not "in good faith and for valuable consideration." The question for determination is whether the Official Receiver has discharged the burden that lay on him. The Courts below have received a categorical finding in favour of the receiver. Learned Counsel for the applicant has argued that the Courts below have not correctly interpreted Section 53 of the Act. Section 53 provides:
Any transfer of property .... in favour of a purchaser or inoumbranoer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent... within two years after the date of transfer, be voidable as against the receiver and may be annulled by the Court.
2. Learned Counsel contends that unless it is proved that the transfer is not in good faith as well as without consideration the application for annulment must fail. In other words, it is contended that the transfer cannot be avoided if even one of the two conditions is fulfilled. We are unable to agree with this contention. The transfer can be upheld only if both the conditions are complied with. The protection given to the transferee under the section is limited to cases where the transfer is found to be both in good faith and for valuable consideration. As stated above the Official Receiver has to satisfy the Court in the first instance that the transfer is voidable in law.
3. The first question to be determined is, whether the transfer is for valuable consideration. It has been found by the Courts below, and we are bound to accept the finding, that the value of the property transferred is at least Rs. 10,000. The transfer was for a consideration of Bs. 5000. It follows therefore that the consideration is inadequate. The section does not demand that the transfer should be for full and adequate consideration. That being so, it cannot be held that the transfer is without valuable consideration unless it is found that the consideration was so small as to be negligible in relation to the value of the property. In P.K. Banerji v. Mangal Prasad ('32) 19 A.I.R. 1932 All. 243 a Bench of this Court held:
The consideration would be valuable if it is not so small as to be negligible when the value of the property is to be taken into account.
4. The learned Judges referred to Stroud's Judicial Dictionary to ascertain the meaning of "valuable consideration." "Valuable consideration" in Section 53, Provincial Insolvency Act, has been explained in that dictionary as meaning " money or money's worth " and "valuable" as meaning "real as distinguished from a consideration that is merely illusory or nominal, but not necessarily meaning equivalent." In the light of the observations made by the learned Judges in that case, it must be held that in the present case the transfer was for valuable consideration although it was an inadequate consideration. In the same ruling the learned Judges have held that an inadequate consideration may be evidence of want of good faith which may by itself be sufficient for setting aside the transfer. We have therefore to see whether in the present case circumstances exist which would justify us to hold that the transfer was not in good faith. Having regard to the relationship between the parties to the transfer it is not possible to produce direct evidence of want of good faith. The question must be determined in the light of circumstances existing at the time of the transfer. It has been held by the Courts below that the wife never demanded her dower from her husband. That by itself will not be evidence of bad faith. A debtor may like to pay off his debt even without a demand being made by the creditor. It is however found that at the time of the transfer several decrees were passed against the debtor the aggregate amount of which was over Rs. 20,000. The vendor transferred his entire property in favour of his wife and retained nothing for the satisfaction of the decrees that were obtained by other creditors. It is true that in certain cases it is permissible for the debtor to give preference to a particular creditor and even if the transferee had knowledge of the existence of other debts the transfer cannot be impugned on the ground of preference alone under Section 53 of the Act, but in such a case the only purpose of the transfer must be to secure the debt due to the transferee and the property transferred should not be substantially more than the amount of debt which is sought to be satisfied by the transfer. In Nagendra Nath v. Pramatha Nath ('39) 26 A.I.R. 1939 Cal 503 it was held:
In a case where the transfers are sought to be avoided under 8. 53 and not under Section 54 of the Act a preferential transfer of property to one creditor in satisfaction of an existing debt due to him is not fraudulent as to other creditors, although the debtor in making the transfer intended to defeat the claims and the transferee had knowledge of such intention, if the only purpose of the latter is to. secure his own debt and the property is not worth materially more than the amount of his debt.
5. In laying down this proposition the learned Judges followed the case in Lala Hakim Lal v. Mooshabar Sahoo ('07) 34 Cal 999. In the present case, we find that although the transfer was for valuable consideration, it was not for adequate consideration. The debtor divested himself of the entire property which was worth at least Rs. 10,000.
6. The sole purpose of the transfer therefore could not have been only to give preference to Mt. Majidunnissa but to defraud the creditors. The transferor transferred his entire property so that the other creditors may not be able to proceed against it for the satisfaction of the decrees obtained by them. In the circumstances we are unable to hold that the Courts below have come to a wrong conclusion. It is then argued that the law requires that the transferee should be a party to the fraud and it is contended that in the present ease there is no evidence that the transferee Mt. Majidunnissa knew that her husband was heavily indebted and was transferring the property in lieu of dower debt with a view to defraud his other creditors. We are relieved of the necessity of examining the evidence on this point in view of the finding of the Court below. The learned Judge after discussing the evidence and circumstances came to the following conclusion : "It necessarily follows that the vendee no less than the vendor was actuated by a motive to defraud creditors." Having regard to the close relationship between the parties, it is permissible to assume that the wife knew of the financial condition of her husband and the motive underlying the transfer. In our judgment, the inadequacy of consideration by itself is sufficient to prove want of good faith and on this finding the transfer must be set aside. For the reasons given above we see no reason to interfere with the order of the Court below. We accordingly dismiss this application with costs.
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Mt. Majidunnisa Bibi vs Babu Puran Chander Roy, Official ...


High Court Of Judicature at Allahabad

30 April, 1941