Abdul Kadhar Sahib And Others v. Official Assignee Of Madras .

White, C.J:— This is an appeal against an order made in the insolvency of a man who carried on business in the name of Mahomad Oosman Sahib & Co. He was adjudicated an insolvent on a creditor's petition on 18th May 1910. The order which is appealed against is an order dated 29th August 1911. By that order, the Court declared the sale by the insolvent to one Abdul Kadhar Sahib, who is the appellant before us, of certain houses and lands at Ambur belonging to the insolvent on 5th January 1910, for the sum of Rs. 7,000, was void against the Official Assignee; and ordered that the said Abdul Kadhar Sahib should deliver to the Official Assignee possession of the property in question. The circumstances, in which this order came to be made, so far as I can gather, appear to be these: On 29th March 1911, a report was made by the Official Assignee in this insolvency. The only observation with reference to the report, which I think it necessary to make for the purposes of the question now before us, is that the report contains no reference to the transaction of 5th January 1910, which has been set aside by the order now under appeal. On that report the learned Judge, on 24th April 1911, in an order, which recites a motion of the Official Assignee the reading of this report and of a report by a third party and a further report by the Official Assignee filed on 21st April 1911 (which is not before us), ordered a commission to issue directing a certain gentleman to take down, the evidence of the appellant. That order was made under the powers conferred by Section 36 of the Insolvency Act, which corresponds to Section 27 of the English Bankruptcy Act of 1883.

2. There was a further order with reference to the appointment of the commissioner, but I need not refer to that because evidence on commission was never taken, and the evidence which was directed by the learned Judge to be taken under S. 36 of the Act was taken by the learned Judge himself.

3. After the evidence was taken, the learned Judge made an order under S. 30(5) of the Act. He declined to take further evidence. The original order only directed the examination of the appellant and on an application by the Official Assignee that the other witnesses should be examined, the learned Judge quite rightly—as it seems to me—upheld the objection that other witnesses could not be examined. The appellant was cross-examined in the first instance on behalf of the Official Assignee and was then re-examined by Mr. Grant who appeared for the witnesses. The order states that the Official Assignee had sought to prove that the appellant was in possession of certain properties under an alienation made on 5th January 1910, and that alienation having been made two years prior to the adjudication, was void as against the Official Assignee, unless it was made for consideration and in good faith. To prove that it was not made for ??? consideration and in good faith, the appellant had been examined. After ??? the appellant's evidence, the learned Judge observes: “I am satisfied that the transaction was not made in good faith or on valuable consideration. The transfer of property is void against the Official Assignee under Section 55 of the Insolvency Act and under S. 36, Cl. (5). I accordingly order Abdul Kader (the appellant) to deliver possession (of the subject-matter of the sale of 5th January 1910) to the Official Assignee.

4. I express no opinion as to whether the transaction of 5th January 1910 is a transaction which can beset aside under Section 55 of the Insolvency Act, if an application for that purpose is made in due course by, the Official Assignee. All I say is—and say its with the greatest respect to the learned Judge that it seems to me it was not open to him in the proceedings which were then before him, to make an order declaring the transaction void under S. 55. The materials on which the order was made are recited in the formal order, dated 29th August 1911, to which I have already referred.

5. Now the object as I understand of S. 36 is to enable the Official Assignee or any creditor who has proved his debt to obtain information with reference to the property belonging to the insolvent. On that information, proceedings may be taken for the purpose of impeaching transactions which are voidable under the sections of the Act relating to voluntary transfers, fraudulent preferences, and cognate matters. The main object of S. 36 is discovery. I speak with some confidence when I say that under English practice, this is so. The English practice laid down in Section 27 of the English Bankruptcy Act, to which Section 36 of the Indian Act closely corresponds, except that under the English Act the application for the summoning of a witness can only be made by the Official Receiver or trustee, whilst under the Indian Act it can be made by the Official Assignee or by any creditor who has proved. No doubt, under S. 36 (sub-s. 5) there is power in the Court, on the application of the Official Assignee but not of a creditor, if on the examination of the witness, the Court is satisfied that he has in his possession property belonging to the insolvent, to order him to deliver to the Official Assignee the property which belongs to the insolvent.

6. Now I do not think it can be held, that the property in question in this case at the time that this examination was held cm be said to be property belonging to the insolvent within the meaning of the sub-section: Prima facie, it belonged to the man in whose name the title-deeds stood, and who had taken a transfer of the property in January 1913, i.e, about four months before the date of the order of adjudication; It may be that the transaction comes within the purview of one of the sections of the Insolvency Act—it may be that it comes within the purview of S. 55 which enables the Court to avoid a voluntary transfer. It his been held that, under Section 47 of the English Act, which is almost the same as Section 55 of the Indian Act, “void” means “voidable,” the settlement or whatever the transaction may be being avoided not from its date, but only from the accrual of the trustees' title: see the case of Re Brail, Ex parte Norton(1) and other authorities cited by Vaughan Williams. L.J in his book on Bankruptcy, Edn. 9, p. 266. The transaction, which the Official Assignee sought to impeach in these proceedings, is the transaction which may or may not be voidable under Section 55 of the Insolvency Act; but as it seems to me for the purposes of sub-S. 5 of S. 36, if the transaction is only voidable, the property which is the subject-matter of the transaction cannot be treated as property belonging to the inso vent within the meaning of Section 36(5) of the Insolvency Act.

7. The question whether a transaction amounted to a voluntary transfer within the meaning of S. 55 has been decided only on the evidence of the one witness who was examined under the order made under S. 36 and without any substantive application to the Court for an order that the transaction was a voluntary transfer. It is true that in this case the witness who was examined was the party in whose favour the sale-deed was made; but it does not seem to me that this makes any difference on principle. It seems to me that a question of this sort must be determined in the ordinary way contemplated by the Act and the rules, i.e, by notice of motion supported by evidence which the other side has an opportunity of answering it. Here all that happened was that the man in whose name the sale-deed was effected was cross-examined by the Official Assignee in proceedings under an order made under S. 36. This was the only evidence the report of 29th March 1911, assuming it to be evidence, does not refer to this transaction and from the very nature of the proceedings, there could be no other evidence. It may be that the witness was not in a position to put in evidence and it may be that no objection was taken at the time to the making of the order. But it seems to me, for the purposes of the question whether the learned Judge had power in the circumstances in which the order was made, to make an order declaring the transfer void, these considerations really have very little bearing on the question. I have given this case very careful consideration; I can come to be other conclusion, but that the learned Judge had no power to make the order in the circumstances in which it was made. I think that the older must be set aside with costs of the appeal. There will be no order as to costs in the Court below. I certify for two counsel.

Oldfield, J.:— I concur.

S.N/R.K

8. Order set aside.