The main legal point established in the judgment is the interpretation and application of Sections 53 and 54 of the Provincial Insolvency Act 5 of 1920 in the context of fraudulent preference and the annulment of a mortgage deed.

Sundaram Chetty, J.

1. This is a civil revision petition filed against the judgment of the District Judge of Coimbatore in O.M.A. No. 31 of 1928 confirming the decision of the trial Court in an application under Sections 53 and 54, Provincial Insolvency Act 5 of 1920, for the annulment of the mortgage deed, Ex. 1, dated 9th October 1924, and executed by one Subbaraya Goundan (who was subsequently adjudged an insolvent) in favour of Subramaniam Ohettiar, by his agent Narayanan Ohettiar for Rs. 7,000. The applicant was one of the petitioning creditors at whose instance the debtor, Subbaraya. Goundan, was declared an insolvent. Both the lower Courts have given a concurrent finding that the aforesaid mortgage was a fraudulent preference in favour of one of the creditors within the meaning of Section 54 of the Act and on the strength of that finding annulled the mortgage as against the Official Receiver. The petition for annulment had to be filed by one of the creditors as the Official Receiver declined to take any action. There is no doubt that a creditor can make an application of this kind when the receiver refuses to act. The present civil revision petition was filed by the alienee. The debtor is respondent 1 in this petition, and on his death, his two sons have been added as his legal representatives. Respondent 2 is the applicant who filed the petition for annulment of the, mortgage.

2. The facts of this case may be briefly stated. Subbarayya Goundan, though possessed of some property, was in embarrassed circumstances. He was indebted to several money lending firms and other creditors, in respect of some of the debts, decrees also appear to have been passed. When the matters stood thus, he found himself unable to pay his debts as they became due, with the result that a sort of composition with his creditors was attempted to be effected. At a meeting of some of the creditors, the debtor desired them to reduce the fate of interest upon his debts from three to, one per cent per mensem, and asked them to wait for two months. Two of the creditors agreed to the reduction of interest to 18 per cent in respect of all the debts, but Narayanan Chetty, the agent of the present petitioner, did not agree to such a reduction in respect of his dues. No final agreement could be reached. Subsequently, some arrangement was effected as between Narayanan Chettiar (the agent of the petitioner) and the debtor, whereby the mortgage in question for Rs. 7000 was created in favour of the petitioner of almost the entire property of the debtors family. The interest due to the petitioner on the previous debts was fixed at a per cent mensem, and for the amount so found due, namely, Rupees 5,009 together with a sum of Rs. 1,991 received in cash, (in all Rs. 7,000) interest at 2 per cent per mensem was fixed in the mortgage bond. The finding of the learned Subordinate Judge is to the effect, that the debtor, who was in embarrassed cireumstances, was pricked in mind on account of the refractory conduct of some of the creditors who declined to reduce the interest as desired by him, and created a mortgage practically over his entire property in favour of the present petitioner, to whom he gave a vindictive preference, with a view to punish the other creditors. The learned District Judge has adopted a similar view. He says that the debtor acted in this way in order (to put one creditor (the petitioner) in a favoured position. It is however argued before me that the Courts below should have held that the dominant motive of the debtor was to secure the cash advance of Rs. 1,991 and not to show any preference to the petitioner over the other creditors of the insolvent. It is true that for the purpose of avoiding a transfer of property under Section 54 of the Act as a fraudulent preference, it must be shown that the dominant or sub-stantial motive of the debtor was to give preference to one creditor over the rest. That is a question of fact to be decided accordi