Hurdutrai Jagdish Prasad & Ors. v. Official Assignee Of Calcutta .

The Judgment of the Court was delivered by

Mukherjea, J.:— The Appellants before us are the transferees of certain shares and piece-goods from a firm known as Badridas Chunilal the partners of which were adjudicated insolvents, and the appeal is directed against an order made by Gentle, J., annulling the transfer under sec. 56 of the Presidency Towns Insolvency Act. To appreciate the points in controversy between the parties it would be necessary to narrate certain material facts.

2. The insolvent firm known as Badridas Chunilal had, as its partners, at all material times, two persons named Bhairolal Bathwal and Ramsarup Bathwal and they used to carry on business as Commission Agents at Premises No. 4, Narayanprasad Lane, in the town of Calcutta. The said two persons also carried on similar business in another firm name known as Radhakissen Murarilal in the same premises. There were two other businesses owned by these persons, one at Gola and the other at Basti, both situated in the United Provinces. The Basti firm which went by the name of Badridas Ramsarup, had as its third partner, a man named Hiralal Rungta. It appears from the records an 1 is not disputed before us, that Bhairolal and Ramsarup used to stay for the most part at Gola and Basti respectively and the businesses carried on in Premises No. 4, Nara-yanprosad Lane in Calcutta were entirely in charge of a Manager named Jagannath Pandey in whose favour a power-of-attorney was executed by the partners. The Appellant Hurdutray Jagdish Prasad is a firm carrying op business in piece-goods at the very same premises, namely, No. 4, Narayanprasad Lane and its office was situated in the same room as that of Bhairolal and Ramsarup. The senior partner of the Appellant firm was one Benaresilal who was practically in charge of the business and he was assisted by a gomasta named Gopiram. For several years prior to August, 1938, the Appellant maintained a khatapeta account with the firms of Badri-das Chunilal and Radhakissen Murarilal and the accounts show that in or about August, 1938, the firm of Radhakissen Murarilal owed the Appellant a sum of Rs. 21,946 annas odd and on the other hand there was a small sum of Rs. 1,625 due and owing by the Appellant to the Badridas firm. It appears that at about this time Jagannath Pandey was hard pressed for payment by a large number of creditors to whom money was due by the two firms under his charge and he had to send several messages to the partners at Basti, requesting them to send money to meet these demands. The proprietors did remit some cash money which, however, was not adequate for the purpose, and they further sent to Panday 844 shares in Mahabir Jute Mills, Ltd., with instructions to sell the same in case it was considered necessary. On the 25th August, 1938, the transaction took place which is the subject-matter of dispute in the present proceedings. On that date 200 shares in the Mahabir Jute Mills, Ltd., were sold to the Appellant, Hurdutray Jagdishprasad by Jagannath Pandey on behalf of the debtors for a consideration of Rs. 5,000 and certain piece goods were also sold to the latter for the price of Rs. 13,000. None of these payments were made in cash and they were set off against the debt due to Hurdutray Jagdishprasad by Radhakissen Murarilal firm on the Khatapeta account stated above, and the result was that the amount of the debt due to the transferees was paid off and satisfied to the extent of Rs. 18,000. It appears that on 27th August, 1938, several creditors or their representatives travell-ed to Basti where they met the debtors. They were accompanied by Jagannath Pandey and also by Benarasilal, the Managing partner of the Appellant firm and the expenses of the latter were paid by Pandey out of money belonging to Badridas firm. At Basti there was a discussion between the debtors and the creditors as to the effective method of paying off the dues of the latter and on 30th August, 1938, an agreement was arrived at between the proprietors of Badridas Chunilal and the 12 creditors or their representatives who were present at Basti at that time and took part in the conference; and in that agreement Pandey as well as Ramsarup's son joined as parties executants. The document provided, inter alia, that the 12 creditors who were parties to the agreement, after returning to Calcutta, would consult the other creditors of the firm and after obtaining their consent would send a wire to the partners at Basti upon which the debtors would proceed to Calcutta and execute a deed of composition and settlement embodying the arrangement for payment of debts. A sum of Rs. 36,000 would be paid in cash at the date of registration of the document and the debtors would also transfer to the creditors at the same time shares in the Mahabir Jute Mills, Ltd. of the face value of Rs. 1,08,000 for a consideration of Rs. 40,000 only. The balance of the debts would be paid off on certain instalments as specified in the deed of agreement. Benarasilal who was present at this meeting was not a party to the deed although he signed it as an attesting witness. The creditors returned to Calcutta and after certain conferences, deed of composition was agreed upon. Messrs. Himatasingka and Co., Attorneys, were instructed to draft the deed. On the 16th September, 1938, the partners of the debtors firm approved of the draft and arranged to execute the deed on the day following. Eventually, however, the deed was not executed and the debtors left Calcutta on the 19th September, 1938. On the 26th September, 1938, a firm named Ram Chandra Hanuman Bux who was a creditor of Badridas Chunilal to the extent of Rs. 5,351 presented an application in the Original Side of this Court in its Insolvency Jurisdiction for adjudicating the partners of the debtors firm insolvents under the Presidency Towns Insolvency Act. Several acts of insolvency were alleged in the petition and one of the allegations which is contained in cl. (f) of paragraph 20 of the affidavit of the petitioning creditors runs as follows:—

“That with a view to give preference the debtors have transferred a portion of their goods and certain shares and debentures, to the creditors named in paragraph 17 hereof with a view to give the said creditors fraudulent preference over other creditors and are liable to be set aside”.

3. Paragraph 17 set out inter alia the transfer of 200 shares in Mahabir Jute Mills, Ltd. to Hurdutray Jagdishprasad. On the 17th January, 1939, the order of adjudication was passed by Mr. Justice Panckridge and Ramsarup and Bhairolal were adjudged insolvents. On the 3rd March, 1939, the order of adjudication was notified in the official Gazette. Sometime after that the insolvents submitted a scheme of composition in satisfaction of their debts which being approved of by the Court on the 14th September, 1939, the order of adjudication was annulled on that date under sec. 30 of the Presidency Towns Insolvency Act. Nothing appears to have been done under the scheme of composition and by its order dated the 2nd July, 1941, the composition scheme was set aside and the debtors were re-adjudicated insolvents under sec. 31(1) of the Presidency Towns Insolvency Act. On the 25th August, 1941, the Official Assignee instituted a suit (being Suit No. 1461 of 1941) against the present Appellant Hurdutray Jagdishprasad making Jagannath Pandey a party Defendant, claiming the return of 200 shares in the Mahabir Jute Mills, Ltd. transferred to the Appellant by Jagannath Pandey on behalf of the insolvents on the 25th August, 1938, the grounds alleged being that the transfer was without any consideration and could not create any title in the transferee. In the alternative there was a claim for Rs. 20,000 as the price of the shares against Jagannath Pandey on the ground that he had transferred them to Hurdutray Jagdishprasad without any authority or power to do so. This suit which related to the 200 shares only and not to the piece-goods which were also sold on the same day was filed as an ordinary commercial suit and not under the Insolvency procedure. It was heard by McNair, J. and by his judgment dated the 6th August, 1943, the learned Judge dismissed the suit. The two points for decision in the suit were (1) whether the transfer of the shares was for consideration and (2) whether Pandey had any authority to transfer the shares and both the questions were decided in favour of the Defendant. There was an appeal taken against this judgment by the Official Assignee and this appeal was dismissed on the 12th February, 1945. Sir Harold Derbyshire, C.J, who delivered the judgment of the Appeal Bench observed in his judgment that the suit was not brought under the Insolvency procedure and no case under sec. 55 or 56 of the Presidency Towns Insolvency Act was raised either explicitly or by implication in the pleadings, the only points canvassed being whether the transfer was for consideration and whether Pandey had the requisite authority to make the transfer. It further appears from the judgment of the learned Chief Justice that in course of the arguments the Advocate-General who appeared for the Official Assignee was asked as to whether he desired to amend the plaint for making a specific case under sec. 56 of the Presidency Towns Insolvency Act and to this question a negative answer was given. On the 7th May, 1945, the present application was filed by the Official Assignee against Hurdutray Jagdishprasad praying for a declaration that the transfer of the 200 shares in Mahabir Jute Mills, Ltd. as well as of the piece-goods effected by the debtors through their Agent Jagannath Pandey on the 25th August, 1938, was void against the Official Assignee under secs. 55 and 56 of the Presidency Towns Insolvency Act. There was a prayer for delivery of these shares and goods and for other consequential reliefs. The application was heard by Mr. Justice Gentle who by his judgment dated the 20th December, 194s, allowed the application and declared the transfers to be void against the Official Assignee under sec. 56 of the Presidency Towns Insolvency Act. The transferee was directed to deliver up the shares and goods to the Official Assignee if they were not sold already. In case they were sold an enquiry was directed for ascertaining their price and the Official Assignee was declared entitled to recover the price thus ascertained. It is against this judgment that the present appeal has been preferred.

4. With regard to the transfer of 200 shares in Mahabir Jute Mills, Ltd., it has been held by Mr. Justice Gentle, that as that transfer was relied upon as an act of fraudulent preference in the application for adjudication presented by the creditors and this was one of the acts of insolvency upon which the adjudication under was based, the transferee was precluded by reason of the adjudication from contending that the transfer was not an act of fraudulent preference. As regards the transfer of goods the learned Judge found that all the elements necessary to constitute fraudulent preference of a creditor were made out in this case and that the application of the Official Assignee was neither barred by reason of the decision in Suit No. 1461 of 1941 nor was it filed beyond any period of limitation prescribed by law. Mr. Khaitan in support of the appeal has challenged the propriety of the judgment appealed against on the following grounds.

5. He has contended in the first place that the learned single Judge was not right in holding that the order of adjudication operated by way of estoppel or res judicata and precluded the Appellant from raising the defence that the transfer of the shares was not by way of fraudulent preference. His second contention is that the present application of the Official Assignee is barred by the doctrine of res judicata by reason of the decision in Suit No. 1461 of 1941. In the third place, it is argued that Article 181 of the Limitation Act governs a case of this description and the application to avoid the transfer is barred by that Article. The next point taken is that as in this case the order of adjudication was annulled on the 14th September, 1939, and there was re-adjudication only on the 2nd July, 1941, the provisions of sec. 56 of the Presidency Towns Insolvency Act could no longer be invoked by the Official Assignee as the transfer took place nearly three years prior to the re-adjudication order. The last ground urged is that the dominant intention of the transferor in making the transfer in favour of the creditor was not to prefer the latter to other creditors but to benefit the debtors themselves and consequently the transaction was not hit by sec. 56 of the Presidency Towns Insolvency Act.

6. We will take up these points one after another.

7. So far as the first point is concerned, as I have stated already, in the application for insolvency presented by the creditors one of the acts of insolvency upon which adjudication was prayed for was that the debtors transferred portions of their goods and certain shares and debentures to several persons alleged to be their creditors with a view to give them fraudulent preference oyer other creditors. Details of these transfers were given in paragraph 17 of the affidavit and they include this transfer of 200 shares in Mahabir Jute Mills, Ltd. to Hurdutray Jagdisprasad on the 25th August, 1938. The order of adjudication made by Mr. Justice Panckridge set out in five clauses the various acts of insolvency which appeared to the Court to have been committed by the debtors and upon which the adjudication order purported to be based. Cl. (d) which is material for our present purposes stands as follows:

“That with a view to give preference the said debtors have transferred a portion of their goods and certain shares and debentures to several persons alleged to be their creditors with a view to give them a [fraudulent preference over other creditors and the said transfers are liable to be set aside”.

8. It was held in England in Ex parte Learoyd(1) an adjudication, so long as it stands, is conclusive evidence as against a third person that the act of bankruptcy on which the adjudication order was professedly founded, was in fact committed and the title of the trustee relates back to that act of bankruptcy. A third person, therefore whose title is affected by the adjudication is a “person aggrieved” and is entitled as such to appeal from the order and to have it set aside. If he does not, he cannot dispute it afterwards. This decision though given under the English Bankruptcy Act of 1869 has been held to be good law even at present and this principle was held applicable to India by a decision of an Appeal Bench of this Court which is to be found reported in Mohammed Siddique Yousuff… v. The Official Assignee Of Calcutta….*(2). The case went on appeal to the Judicial Committee [vide Mahomed Siddique Yusuf v. The Official Assignee of Calcutta(3)] and their Lordships, though they differed from the High Court on the question of granting extension to the third party for filing an appeal against the adjudication order, agreed with this Court in holding that the principle enunciated in Ex parte Learoyd was applicable to India under the Presidency Towns Insolvency Act, the provisions of which were very much similar to the English Bankruptcy Act; and they expressly disapproved of the contrary view taken by the Madras High Court in Official Assignee Of Madras v. O.R.M.O.R.S. Firm(4). The law thus laid down by the highest tribunal cannot and has not been challenged on behalf of the Appellant. Mr. Khaitan contended, however, and in our opinion, rightly, that cl. (d) in the adjudication order mentioned aforesaid cannot be said to refer unambiguously to the transaction in question and an order couched in such a vague and general terms could not operate as res judicata. It will be seen that cl. (d) in the adjudication order quoted above states in general terms that the debtors have transferred portions of their goods and certain shares and debentures to several persons alleged to be their creditors. These persons are not mentioned by name nor are the transactions specified and there is a singular omission in this order to make any reference either expressly or impliedly to paragraph 17 of the petition of Insolvency wherein these transactions were set out. We cannot accept the contention of Mr. Chatterji that the insolvency petition should be treated as an annexure to this adjudication order. From the language of the adjudication order it cannot be said that the Insolvency Court came to a finding that all the transactions referred to in paragraph 17 of the Insolvency petition were acts of fraudulent preference within the meaning of the Insolvency Law. In our opinion, therefore, Mr. Justice Gentle was not right in holding that the Appellant was precluded by any rule of res judicata from putting forward its defence in this proceeding that the transfer was not void against the Official Assignee by reason of its being a fraudulent preference within the meaning of sec. 56 of the Presidency Towns Insolvency Act.

9. We have now to consider how far the claim of the Official Assignee is itself barred by reason of the decision in the previous suit, namely, Suit No. 1461 of 1941 brought by him. In that suit, as I have stated already, the claim of the Official Assignee rested primarily on the ground that the transfer of 200 shares in Mahabir Jute Mills, Ltd. was void for want of consideration and hence did not create any title in the transferee. It was further alleged that Jagannath Pandey had no authority to transfer the shares. No question of any fraudulent preference was raised either explicitly or impliedly in the pleadings and both the trial Judge as well as the Appellate Bench proceeded on the footing that the only points for consideration were whether the transfer of the shares was a fictitious transaction which was void for want of consideration and whether Jagannath Pandey had any authority to make the transfer. The matter that arises for consideration in the present proceeding was, therefore, not raised in the previous suit and it was neither heard nor decided by the Court in that suit. Mr. Khaitan in support of his contention invokes the principle of constructive res judicata and relying on Explanation 4 attached to sec. 11 of the Civil Procedure Code he argues that the Official Assignee might and ought to have made a ground of attack in the earlier suit that the transfer was void against him under sec. 56 of the Presidency Towns Insolvency Act and as he omitted to do so he is precluded from raising it in the present proceeding. Mr. Justice Gentle negatived this contention on the ground that the previous suit was not brought under the Insolvency procedure but was filed as an ordinary commercial suit and no Court other than the Insolvency Court would have any jurisdiction to entertain a claim under sec. 56 of the Presidency Towns Insolvency Act. The question of fraudulent preference of a creditor could not consequently be raised at all in the previous suit. The first question which we have to consider is whether it is within the exclusive jurisdiction of the Insolvency Court to deal with a matter coming under secs. 55 and 56 of the Presidency Towns Insolvency Act. If the jurisdiction is exclusive, obviously no question of fraudulent preference could have been agitated in the earlier suit of the Official Assignee and no question of constructive res judicata could arise at all. If on the other hand it is held that a Civil Court can exercise jurisdiction concurrently with the Insolvency Court in matters of avoiding transfers which are void against the Official Assignee under the special provisions of the Insolvency Law, such question undoubtedly could have been raised in the earlier suit. The further question then would be whether the Official Assignee even though he might, was bound to put forward this ground in support of the claim which he made in the earlier suit. If he was not bound to do so and could have reserved this question for decision by the Insolvency Court the doctrine of constructive res judicata would not help the Appellants.

10. It is a settled principle of law that when new rights or liabilities are created by a statute and the statute also indicates the manner in which such rights and obligations are to be enforced, the remedy thus provided should be deemed to be exclusive and the ordinary right of suit would be barred. As Lord Tentarden, C.J, observed in Doe dem. Bishop of Rochester v. Bridges(5):

“where an Act creates an obligation and enforces the performance in a specific manner we take it to be a general rule that performance cannot be enforced in any other manner. If an obligation is created, but no mode of enforcing its performance is ordained, the common law may, in general, find a mode suited to the particular nature of the case”.

11. The same principle was enunciated by Willes, J., in Wolverhampton New Waterworks Co. v. Howkesford(6) and was followed by the Judicial Committee in Attorney-General of Trinidad and Tobago v. Gordon Grant and Company(7).

12. It cannot be disputed that the Insolvency Law is entirely a creature of statute. There is no such thing as common law Bankruptcy. The Insolvency Law creates new right and obligations and the Trustee of Official Assignee who is made the statutory representative of the estate of the insolvent can not only assert such rights against third parties as the insolvent could have asserted, but as a trustee for the creditors he is endowed with higher rights by the Insolvency Law itself which entitle him to impeach transactions which the insolvent himself could not have challenged. Under the Provincial Insolvency Act the power to exercise insolvency jurisdiction is vested in the District Courts (sec. 3); while sec. 4 of the Presidency Towns Insolvency Act provides as follows:

“All matters in respect of which jurisdiction is given by this Act shall be ordinarily transacted and disposed of by or under the direction of one of the Judges of the Court and the Chief Justice……………………….shall from time to time assign a judge for that purpose”.

13. Both the Insolvency Acts which are in force in India do, therefore, create a special Court which may be called the Insolvency Court, but whether or not all matters arising under any of the Acts are to be tried exclusively by the Special Court set up by them would depend entirely upon the language of the particular Act. Sec. 7 of the Presidency Towns Insolvency Act which is very similar to sec. 105 of the English Bankruptcy Act runs as follows:

“Subject to the provisions of this Act the Court shall have full powers to decide all questions of priorities, and all other questions whatsoever, whether of law or of fact, which may arise in any ease of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of the property in any such case”.

14. Thus the Insolvency Court which is created by sec. 4 of the Act is not only invested with full powers to decide all questions arising in any case of insolvency coming within the cognizance of the Court, it can also decide other matters for the purpose of doing complete justice or making a complete distribution of the property of the insolvent. The scheme of the Presidency Towns Insolvency Act and for the matter of that, of the Provincial Act also seems to be that matters relating to adjudication and discharge of the insolvent or vesting of his property in the Official Assignee and all matters concerning the rights of the creditors and the distribution of the debtors' property amongst them will be dealt with exclusively by the Insolvency Court. In the various sections of the Presidency Towns Insolvency Act dealing with these and other matters, it is expressly provided that jurisdiction in such cases is to be exercised by the “Court” meaning thereby the Insolvency Court, which the Act sets up. With regard to the claims of the Official Assignee against third persons, the only provision in the Presidency Towns Insolvency Act is the general provision contained in sec. 7. There is a difference in this respect between the provisions of the Presidency Towns Insolvency Act and those of the Provincial Act which we shall point out presently. The Insolvency Law as stated above vests two different kinds of rights upon the Official Assignee. In the first place, all the rights which the insolvent had against other persons are remitted to the Official Assignee and the latter is com-petent to enforce those rights in the same way as the insolvent himself could. In the second place, as a trustee for the creditors, the Official Assignee is endowed with higher rights than what the Insolvent had and he can in the exercise of those rights annul transactions with third parties which the insolvent himself could not have challenged.

15. As regards the first class of cases, where the title of the insolvent only is asserted, the usual and convenient procedure is to file an action in the ordinary Civil Court. Under sec. 7 of the Presidency Towns Insolvency Act, the Insolvency Court, if it so chooses, can deal with such matters even in the insolvency jurisdiction, though as a matter of expediency such jurisdiction would not be ordinarily exercised. If an insolvent has been publicly examined under sec. 36 of the Presidency Towns Insolvency Act and he has denied the claim of the Assignee, the latter has no other alternative but to file a suit in the ordinary Courts. But if there was no such public examination the Insolvency Court itself can deal with such claims though it might on grounds of convenience decline to do so. [Vide Mulla's Law of Insolvency, pages 44-47; Official Assignee of Madras v. Narasinha Mudaliar(8)]. This seems to be quite in conformity with the English practice. (Vide Williams on Bankruptcy Practice, 14th Edition, pages 407 to 411).

16. In the second class of cases, where the Official Assignee asserts the higher title which the insolvency law gives him and seems to annul a voluntary transfer or alienation by way of fraudulent preference, the usual practice is to proceed by way of motion in the Insolvency Court. But even here according to English law the ordinary Courts can exercise concurrent jurisdiction if invited to do so and in such matters also the jurisdiction of the Bankruptcy Court is not exclusive (Vide Williams on Bankruptcy Practice, 14th Edition, page 411; Halsbury, Vol. 2, 2nd Edition, page 186). Mr. Khaitan contended that the position is exactly the same under the Presidency Towns Insolvency Act and ordinary Civil Courts, if they are invited can exercise jurisdiction in matters relating to avoidance of voluntary transfer or fraudulent preference. The point undoubtedly is of some importance and requires careful consideration. It is to be noted that regarding this matter there is a marked difference in the language between the provisions of the Provincial Insolvency Act and those of the Presidency Towns Insolvency Act. Secs. 53 and 54 of the Provincial Act expressly provide that voluntary alienations by the debtor and transfers by way of fraudulent preference have got to be annulled by the “Court,” that is to say, the Insolvency Court. Under the provisions of the Provincial Insolvency Act] therefore, the Insolvency Court has exclusive jurisdiction in these matters, and the jurisdiction of the ordinary Courts is ousted. This proposition is well settled and is supported by, a number of decisions. [Vide Mariappa Pillai v. Raman Chettiyar(9), The Official Receiver, Coimbatore v. Palaniswami(10) and Hriday Krishna v. Osmanali(11)]. The language of secs. 55 and 56 of the Presidency Towns Insolvency Act which correspond to secs. 53 and 54 of the Provincial Act is, however, significantly different. They declare a voluntary transfer and a transfer by way of fraudulent preference to be void against the Official Assignee, provided the essential conditions mentioned in the respective sections are fulfilled but they do not say that these transactions are to be annulled by the Court. It would be a fair inference, we think, from the language of these sections to hold that they do nothing else but declare the rights of the Official Assignee and in what manner these rights are to be enforced is left to the general provision contained in sec. 7 of the Act. If sec. 7 does not vest exclusive jurisdiction in regard to such matters in the Insolvency Court the ordinary Courts would not lose their jurisdiction though as a matter of convenience the Insolvency Court might still be the more appropriate tribunal. The Madras High Court has held that this difference in the language between the provisions of the two Acts is of no consequence, and any question as to the invalidity of a transaction raised by the Official Assignee under the special provisions of secs. 55 and 56 of the Presidency Towns Insolvency Act can be determined only by the Insolvency Court and not by the ordinary Courts. [Vide Official Assignee of Bombay v. Sundarachari(12)]. This decision was followed by Lort-Williams, J., in Surya Kumar v. Bejoy Kumar(13). That case arose out of a mortgage suit commenced by a mortgagee to recover money due on a mortgage bond. The mortgagors had been adjudicated insolvents and the Official Assignee who was made a party Defendant contested the suit primarily on the ground that as the transfer was not made in good faith or for valuable consideration it was void against him under sec. 57 of the Presidency Towns Insolvency Act. Lort-Williams, J., held, on the authority of the Madras decision referred to above, that the question which arose under sec. 57 of the Presidency Towns Insolvency Act could only be raised and decided by the Insolvency Court and the proper course for the Official Assignee was not to resist the Plaintiff's claim for a mortgage decree but to reserve his right to apply to the Court in Insolvency and ask it to declare the mortgage void against him on the ground that it was not a bona fide transaction. The learned Judge, however, did go into the merits of this question raised by the Official Assignee and held on evidence that the transaction was bona fide and consequently the mortgagee was entitled to a decree. The pronouncement of the learned Judge on the question of jurisdiction cannot rank higher than an obiter. If the matter could be decided only by the Insolvency Court, it is difficult to see how the learned Judge was competent to go into it and decide the point finally between the parties in the mortgage suit itself. On the other hand, there is a decision of a Division Bench of this Court which is to be found reported in Hridaykrishna v. Osmanali, where stress was expressly laid on the difference in the language of the relevant provisions of the two insolvency Acts, and it was held that while under the Presidency Towns Insolvency Act ordinary Courts may have concurrent jurisdiction to deal with matters relating to avoidance of voluntary transfer or fraudulent preference in favour of creditors, it is the Insolvency Court alone that is competent to annul a transaction under sec. 53 of the Provincial Insolvency Act.

17. There is no express decision of our Court where this question relating to jurisdiction of the ordinary Civil Courts to decide matters coming under secs. 55 and 56 of the Presidency Towns Insolvency Act have been expressly raised and decided; but there are cases where the Court seems to have proceeded on the assumption that the jurisdiction of the Insolvency Court in such matters is not exclusive. As we have already pointed out, in Suit No. 1461 of 1941, instituted by the Official Assignee against the present Appellant, the Appeal Court expressed its readiness to allow the Plaintiff Assignee to amend the plaint and raise a specific case under secs. 55 and 56 of the Presidency Towns Insolvency Act. This would not have been possible if relief under secs. 55 and 56 of the Presidency Towns Insolvency Act could be granted only by the Insolvency Court. We may refer in this connection to another case which was decided by an Appeal Bench of this Court and which is to be found reported in Umesh Chunder v. G.M Falkner(14). This was a proceeding under sec. 55 of the Presidency Towns Insolvency Act and At was commenced by way of motion before the Insolvency Court. The Appellate Court held that the case was not tried properly by the Insolvency Judge and the decision was not supported by evidence. The learned Counsel who appeared for the transferee argued that the matter could be tried more properly by an ordinary Civil Court and prayed that the Official Assignee might be referred to a civil suit. It appears that the jurisdiction of ordinary Civil Courts to determine such matters was not disputed either by the Court or by any of the parties though the learned Judges held on the particular facts of the case that it would be convenient to have a re-trial of the whole matter by the Insolvency Judge. Reference can also be made to the decision of the Judicial Committee in Sime Darby and Co., Ltd. v. The Official Assignee of the Estate of Lee Pang Seng(15). This was a case under sec. 51(1) of the Singapore Bankruptcy Ordinance which is identical with the provisions of sec. 56 of the Presidency Towns Insolvency Act. It would appear from the report that the Official Assignee brought an action in the ordinary Court to avoid fraudulent preference in favour of a creditor and no question was raised either in the Court below or before their Lordships of the Judicial Committee that the case could only be brought before the Insolvency Court.

18. None of these, it is true, are direct authorities on the point but having regard to the fact that the Presidency Towns Insolvency Act closely follows the English Bankruptcy Act and that under the latter the jurisdiction of the Insolvency Courts in matters of voiding voluntary settlements or undue preference in favour of creditors is never considered to be exclusive and having regard to the significant difference in language between the provisions of the Provincial Act and those of the Presidency Towns Insolvency Act on the point, we are inclined to hold that ordinary Civil Courts have concurrent jurisdiction in matters coming under secs. 55 and 56 of the Presidency Towns Insolvency Act though they can decline to exercise such jurisdiction on grounds of expediency and refer the Assignee to the Insolvency Court. The Madras High Court, as stated above, has held that the distinction in the language of the two Acts in regard to these matters is of no consequence. This view is certainly opposed to that taken in Hridaykrishna v. Osmanali. We cannot also accept as sound the reasoning of the learned Judges of the Madras High Court that when a new Act sets up a special tribunal the jurisdiction of that Court over all matters coming under the Act is necessarily exclusive. If the Act itself allots certain matters specifically to such Courts and says nothing about the rest the general jurisdiction of the ordinary Courts should not be taken away unless an intention to oust such jurisdiction clearly appears from the language of the enactment. We hold, therefore, that the Official Assignee might have raised the question of fraudulent preference in Suit No. 1461 of 1941 where the claim was made to recover possession of 200 shares in Mahabir Jute Mills, Ltd., sold by the debtors to the present Appellant. The question now is whether, even if he could, he was bound to raise this point.

19. The question whether a matter ought to have been made a ground of attack or defence in a previous suit is indeed a difficult one and the answer would depend on the facts of each individual case. Certain tests have been laid down by Judges from time to time in this connection though these tests are by no means exhaustive. Ordinarily a party is bound to bring forward his whole case in respect of the matter in litigation and which was open to him upon the points for decision in the suit. He cannot abstain from relying upon a ground of claim which is in question and afterwards make it a cause of fresh suit in respect of the same subject-matter. The ground of attack as contemplated by Explanation 4 attached to sec. 11 of the Civil Procedure Code means of course the ground in respect of the particular claim made. If the Plaintiff has, in support of the claim made by him, more than one ground to rely upon he is bound to set up all of them [vide Fateh Singh v. Jagannath(16)] but he is not bound to include all claims that he has against a particular party although it is open to him to do so. The position will be different when the capacity in which the Plaintiff brings the subsequent suit is not the same in which he sued in the former suit. In such cases, the Plaintiff would not be litigating under the same title and the question of res judicata would not arise at all. One most important test for determining whether a matter ought to have been made a ground of attack in a previous suit is whether the addition of such ground might lead to confusion and embarrassment of trial [vide Nurul Hussein v. Sheosahai Lal(17) and Gudappa v. Tir-kappa(18)]. This would be the case where the evidence in support of such ground would be destructive of the other pleas in the suit, or the joinder would lead to manifest inconsistency and confusion. We will now examine the facts of this case in the light of the above principles.

20. The previous suit was brought by the Official Assignee against the present Appellant and Jagannath Pandey in respect of 200 shares in the Mahabir Jute Mills, Ltd., sold to the Appellant on the 25th August, 1938. The prayers in the suit were of a two-fold character. In the first place the Plaintiff prayed for an order that the Defendants or such of them in whose name the shares have been transferred do transfer them to the Plaintiff and for that purpose do execute such documents and give notices as are necessary in law. In the alternative, he prayed for a decree for the sum of Rs. 20,000 or such sum as represented the value of the shares. The ground put forward in support of the claim were: (1) that the debtors were in insolvent circumstances and no consideration passed nor any was received by the transferors for the transfer of shares and (2) that Jagannath Pandey had no authority to execute any deed or document of transfer of the same. The claim, therefore, was in substance one to recover the 200 shares in Mahabir Jute Mills, Ltd., transferred to Hurdutray & Co. or its equivalent in value. Obviously, the claim could be supported on the ground that the transfer was by way of fraudulent preference of creditors and hence was void against the Official Assignee. It cannot be said that it would constitute a different claim if such ground was taken in the plaint. The relief claimed would be identically the same. Only a new ground would have to be added. Mr. Chatterji made a strenuous attempt to show that the Official Assignee in Suit No. 1461 of 1941 sued in one character, namely, as a statutory representative of the insolvent and asserted only the title of the latter which he alleged was not divested by the transfer which was a fictitious and void transaction. In a proceeding to avoid a transfer by way of fraudulent preference the Official Assignee would undoubtedly have to base his claim on the higher title which the insolvency law gives him. It is quite true that there is a difference in the nature of the two rights. But both these rights are vested in the same person and in the same capacity. The Insolvency Act which vests the insolvent's rights in the Assignee also empowers the latter to annul certain antecedent transactions of the insolvent which the insolvent himself could not have challenged. In the present proceeding, the Official Assignee is litigating under the same title as he did in the previous suit. We cannot also say that the joinder of this additional ground would have resulted in any inconsistency or confusion. On the other hand the allegations actually made in the suit were substantially the same as are made to obtain relief under sec. 55 of the Presidency Towns Insolvency Act. The Official Assignee was aware of the fact that the transferee was a creditor; he knew when the transfer was made and expressly stated in the plaint that the transferors were in insolvent circumstances when the transfer was made. In these circumstances, it is difficult to say that if he had set up a ground of attack under sec. 56 of the Presidency Towns Insolvency Act in the previous suit it would have in any way embarrassed the trial or resulted in any inconsistency in the pleading. We find actually that in the Appellate stage of the suit the Advocate-General did want to make a case under sec. 56 of the Presidency Towns Insolvency Act on behalf of the Official Assignee and although such a case was not made in the pleadings the learned Judges were willing to give him an opportunity to amend the plaint for the purpose of making a definite case under that section. In our opinion the invalidity of the transfer on the ground of its being a fraudulent preference in favour of a creditor under sec. 56 of the Presidency Towns Insolvency Act might and ought to have been made a ground of attack in the earlier suit and consequently the present claim of the Official Assignee is barred by the doctrine of res judicata so far as it relates to the 200 shares in the Mahabir Jute Mills, Ltd. which were the subject-matter of the earlier suit.

21. Mr. Khaitan made an attempt to argue that the claim with regard to the piece-goods also is barred by res judicata, but this contention is manifestly untenable. The earlier suit was in respect of the shares only and not in respect of the piece-goods at all. The two transactions even if they were entered into on the same day are quite different in their nature and the consideration was different also. We hold, therefore, that the claim of the Official Assignee in respect of the 200 shares in Mahabir Jute Mills, Ltd. only is barred by res judicata and we would now proceed to consider the other grounds raised by Mr. Khaitan so far as they relate to the claim for piece-goods.

22. The first of these grounds raises a question of limitation, and Mr. Khaitan's argument is that the present proceeding is barred by limitation inasmuch as it has been commenced; more than three years after the adjudication order was passed. It is conceded that no period of limitation for such an application is prescribed either by the Insolvency Act or the Law of Limitation. Mr. Khaitan's contention is that the residuary Article 181 of the Limitation Act will govern a case of this description and the application would have to be made within three years from the time when the right to apply accrued and which could not be later than the date of adjudication order. We do not think that we can accept this contention as sound. The intention of the Legislature seems to be that such proceeding could be instituted so long as the insolvency continues and that is the reason why no fixed period of limitation has been prescribed for such application either by the Insolvency Act or the Limitation Act. It often happens that a long period of time is token up in winding up the estate of the insolvent and it is quite possible that the transactions which are annullable under the Insolvency Laws were not discovered till a considerable time had elapsed from the date of adjudication.

23. As regards Article 181 of the Indian Limitation Act, it has been held in a long series of decisions that the residuary Article is confined to applications made under the Civil Procedure Code. [Vide Bai Manik Bai v. Manikji(19), In re: Ishan Ch. Roy(20), Ranbir Singh v. Drigpal(21), Tiluck Singh v. Parsotain(22), Rahamat Karim v. Abdul Karim(23) and Saroja Sundari v. Abhoy Choran(24)]. The main reason underlying these decisions is that the examination of all the Articles in the First Schedule to the Limitation Act shows that in every one of them the application is made under the Civil Procedure Code. A residuary Article, it is said, should be construed ejusdem generi with the other Articles dealing with applications. The other ground put forward is that the preamble to the Limitation Act indicates that it is intended to apply not to all applications, but only to certain applications. It is to be pointed out that by the Arbitration Act of 1940, two Articles have been introduced in the Limitation Act, namely, Articles 158 and 178 which relate to applications under the Arbitration Act; and it may be, as was observed in the Special Bench decision of Asmatali Sharip v. Mujaharali Sardar(25) necessary to examine at some time or other closely the reasons upon which the decisions mentioned above purport to be based. But on the present state of authorities we are bound to say that Article 181 of the Limitation Act is confined to applications under the Civil Procedure Code or those applications for the making of which the Civil Procedure Code gives authority [vide Hindusthan Bank v. Mehrajdin(26)]. In the Special Bench case referred to above this Article was held applicable to an application under sec. 26F of the Bengal Tenancy Act but that was because the entire procedure in an application under sec. 26F of the Bengal Tenancy Act is regulated by the Civil Procedure Code. There is no provision whatsoever in the Presidency Towns Insolvency Act according to which the proceedings under the Act are to be governed by the Civil Procedure Code and on the other hand, it is admitted that so far as this Court is concerned, they are governed by the special rules of the Original Side. It was held by the Lahore High Court in Prithi Nath v. Basheswar Nath(27) that an application for avoiding a transfer under sec. 37 of the Old Provincial Insolvency Act was not governed by Article 181 of the Limitation Act and the same view was taken in a subsequent decision of the same High Court where the case arose under sec. 53 of the present Provincial Insolvency Act [vide Daryal Singh v. Kunjalal(28)]. We hold, therefore, that Article 181 of the Limitation Act has no application to proceedings under sec. 55 or sec. 56 of the Presidency Towns Insolvency Act and that the claim of the Official Assignee is not barred by limitation.

24. The next point raised by Mr. Khaitan is that as in this case the order for adjudication was annulled on the 14th September, 1939, and the debtors were re-adjudicated on the 2nd July, 1941, the provisions of sec. 56 of the Presidency Towns Insolvency Act could no longer be invoked as the transfer was made nearly three years prior to the present adjudication. The argument in substance is that for the purpose of determining whether or not the transfer was made within the time prescribed by sec. 56 of the Presidency Towns Insolvency Act the order of adjudication to be considered is that which now subsists, namely, that made on the 2nd July, 1941. The original order of adjudication which was annulled could not be relied upon for this purpose.

25. This question was considered in connection with this very insolvency case in Mt. Devi v. The Official Assignee of Calcutta(29) and it was held by the learned Judges that the re-adjudication was linked up with the original adjudication and the proceedings subsequent to re-adjudication became part of the same insolvency proceeding which was started by the original adjudication. It was expressly held in this case that a conveyance although executed more than two years before the re-adjudication order was void under sec. 55 or 56 of the Presidency Towns Insolvency Act, if it was executed within three months prior to the date of the presentation of the petition upon which the adjudication order was made. We think the decision to be sound and being a pronouncement of an Appeal Bench of this Court is binding on us although we might not agree with some of the observations made by the learned Chief Justice in his judgment. When the Court approves of a scheme of composition and annuls the adjudication order it is well-settled that the bankruptcy proceeding still continues though in another form. The control of the Court is still retained and the proceedings are moulded on the terms of the composition under the directions of the Court [vide West v. Baker(30)]. The Court still retains control over the debtor's property and though the annulment of adjudication puts an end to the insolvents' state of insolvency it does not terminate the insolvency proceedings for all purposes. The language of sec. 31(1) of the Presidency Towns Insolvency Act clearly indicates that the effect of adjudication on annulment of a composition scheme is to restore the state of things flowing from the original order of adjudication subject to this that the validity of any transfer or payment duly made or anything done under the composition scheme could not be challenged. If the contention of Mr. Khaitan be accepted the result will be that proceedings under secs. 55 or 56 of the Presidency Towns Insolvency Act would practically be impossible when a debtor is re-adjudicated an insolvent after his original adjudication was annulled even though the annulment of adjudication might have been made to punish the debtor for some wrongful act committed by him. This contention of Mr. Khaitan must, therefore, fail.

26. The last question for our consideration is whether the transfer was made with the intention of giving the transferee who was a creditor preference over other creditors. In order to avoid a transfer on the ground of fraudulent preference it is not sufficient that the creditor was preferred; it is necessary to show that the transfer was with a view to give the creditor preference over others. The view to prefer must be the dominant view though it is not necessary that it ought to have been the sole view. The onus is on those who claim to avoid the transaction to establish what the debtor really intended and that the real intention was to prefer. The onus is only discharged when the Court upon a review of all the circumstances is satisfied that the dominant intention was to prefer. That may be a matter of direct evidence or of inference from facts but when there is no direct evidence and there is room for more than one explanation, it is not enough to say that there being no direct evidence the intention to prefer must be presumed, [Vide Sime Darby and Co. v. Official Assignee of the Estate of Lee Peng Sang and Sir William Henry Peet v. Gresham Trust(31)]. These propositions are well-settled and we will have to examine the evidence in this case for the purpose of deciding as to whether the Official Assignee has been able to discharge the onus which lay on him.

27. The Appellant attempted to prove in this case that the transfer of the goods and shares was made to him solely because of the pressure that he exerted upon the debtors for payment of the debts due to him. It cannot be disputed that if it was because of pressure that the transfer was made in his favour any inference of preference would be negatived.

28. Now the evidence on this point rests on the oral testimony of Benarasilal, the Managing Partner of the Appellant who says that in July, 1938, he went to Basti and saw the insolvents there. He demanded money amounting to Rs. 21,000 and odd and told the debtors that if they did not pay he would file a suit and humiliate them. The debtors are reported to have said that they would write to Pandey in Calcutta and Benarasilal would get payment from Pandey in Calcutta. The story of Benarasilal is that from Basti he went to Pedrona and 10 or 15 days later returned to Calcutta and saw Pandey some time after that. Pandey told him that he could not make any payment in cash but could give him some shares and piece-goods. This was done and the transactions were completed on or about the 16th August, 1938. Ramsarup and Bhairolal both denied in their evidence that they saw Benarasilal at Basti in July, 1938. This story of Benarasilal has been rejected in its entirety by Gentle, J., and we have no hesitation in holding it to be untrue. The evidence was adduced solely with a view to make out a case of pressure and in this attempt the Appellants miserably failed. But even if the creditors failed to prove pressure the burden would still lie on the Official Assignee who has got to prove that the debtors intended to prefer the transferee to other creditors. Let us see whether this fact can be established from the evidence in the record. It clearly appears from facts which are admitted in this case that in or about July, 1938, the debtors' firm was in very much involved circumstances and there were demands for payment made by a large number of creditors to whom considerable sums of money were due. The office or guddee of the Appellant as well as of the insolvents were on the same room at Premises No. 4, Narayanprasad Lane, from a considerable time past and Pandey and Benarasilal were on very friendly terms with each other. The position, therefore, is that although there were demands by numerous creditors of the firm and although the firm was in insolvent circumstances at that time, certain valuable shares and piece-goods were transferred to one of the many creditors in consideration of his past debts and nothing else. The transfer was not made with a view to set up the debtors in the business or to put off the insolvency. From all these facts an intention to prefer can, in our opinion, be legitimately drawn, particularly as Mr. Justice Gentle has held that the entries in the accounts books relating to these transactions were made neither correctly nor at the time when these transactions were entered into but at a much later period to disguise their real nature. Mr. Khaitan lays considerable stress upon an opinion expressed by Mr. Justice Gentle in course of his judgment that it is possible that the transfer was made shortly before the 26th or 27th August, 1938, when a number of creditors left Calcutta for Bash to meet the debtors at that place and both Pandey and Benarasilal accompanied them. The learned Judge expressed an opinion that it might be that the transfer was made in order to obtain the assistance of Benarasilal at the meeting of creditors which it was anticipated would be held at Basti. Mr. Khaitan is apparently right in contending that if this be the real situation the dominant intention of the debtors or their agent would be to benefit themselves and not the particular creditors and the transfer could be deemed to have been made with a view to use the transferee, as a means of bringing about some arrangement with the other creditors and thereby stave off insolvency. We think, however, that the opinion expressed by the learned Judge was more or less a surmise and it is not borne out by any evidence on the record. In his own deposition Benarasilal flatly denied that he ever accompanied the creditors to Basti or took any part in any conference that was held there. His case is that he went to Basti entirely on his own account to demand payment of money and nothing else. On the other hand, one of the debtors says in his deposition that: when the creditors met him at Basti he did not know at all that the shares in Mahabir Jute Mills, Ltd. or any piece-goods were sold to Hurdutray Jagdishprasad. We have no evidence to show that Benarasilal had any influence with the other creditors and he does not seem to be a likely person whose services would be considered valuable in bringing about an arrangement with the creditors. There is nothing in the evidence to show what part Benarasilal did take in the conference of creditors at Basti and on the other hand the circumstances indicate that he did not pose there as a creditor at all and signed the deed of arrangement with the creditors only as an attesting witness. From these facts no reasonable or even remote inference could be drawn that the transfer was made in favour of the Appellant with a view to have their assistance in the matter of bringing about an arrangement with the creditors and thereby putting off the insolvency of the debtors. The transfer was obviously made with a view to prefer the transferee to other creditors and this was done because of the friendship already existing between Pandey and Benarasilal. After the transfers were completed Benarasilal might have agreed to accompany Pandey to Basti as an act of friendship and that he was not even very generous in this respect is proved by the fact that the expenses of his journey were borne by Pandey. In our opinion, the decision of Mr. Justice Gentle on this point is quite right and is fully consistent with the facts and circumstances of the case.

29. We hold, therefore, that with regard to these piece-goods, the transfer is void against the Official Assignee as being a fraudulent preference in favour of a creditor within the meaning of sec. 56 of the Presidency Towns Insolvency Act.

30. The result is that the appeal succeeds in part. The claim of the Official Assignee to the two hundred shares in Mahabir Jute Mills, Ltd. is dismissed but the decision of Mr. Justice Gentle would stand so far as the claim to the piece-goods is concerned.

31. Each side will bear its own costs here and below.

32. The costs of the Official Assignee will be paid out of the estate. The costs will be taxed as of a defended suit.

33. Certified for two Counsel.

Harries, C.J:— I agree.

C.C