Fraudulent sale under the Provincial Insolvency Act and the burden of proof for consideration

Hallifax—The order in the proceedings under the Provincial Insolvency Act which is attacked in this appeal was passed on the 31st of August, 1920.

The proceedings began on the 22nd of February, 1912, when Act II of 1907 was in force, but that was repealed on the 26th of February, 1920, six months before the order was passed, by Act V of 1920. The two Acts are however practically identical in respect of the provisions with which we are concerned, so that the question of the new or the old Act applying does not really arise.

The learned Additional District Judge has referred to the sections of the Act of 1907 throughout. I do not consider it necessary to set out at any length the reasons for saying that the order of the learned Judge is wrong and setting it aside.

It is indeed not easy to find anything in the order that is right. It is mainly based on the assumption that a accrued creditor is not a creditor within the meaning of S. 37 of the Act. For this extraordinary proposition no reasons have been or could be given. Many could, but need not, be stated against it. The transfer of the village share, which with characteristic inaccuracy is usually called a ten anna share in the proceedings, being in fact a two thirds or ten anna eight pie share, is fraudulent and void under S. 37 of Act III of 1907 or S. 57 of Act V of 1920 and must be annulled.

2. It is also void and must be annulled under S. 36 of Act III of 1907 or S. 53 of Act V of 1920. The learned Judge appears to have held that the sale to Ramprasad, for which the consideration is stated in the sale-deed to be Rs. 5,000 was for good consideration, because it is proved that a sum of Rs. 4,700 was actually paid by him to one Gajadhar Prasad in satisfaction of his mortgage dated the 19th of December 1914 of the same property. But whatever the exact value of the share may be, it is certainly a great deal more than Rs. 5,000 and the sale did in fact extinguish also Ramprasad's own mortgage for Rs. 3,105 which was executed exactly five months earlier, though mention of this extinguishment is very carefully omitted from the sale-deed.

The burden of proving that part of the consideration was given as well as the Rs. 4,700 paid to Gajadhar Prasad lay upon the respondent and every part of the evidence to be found on the record tends directly in the opposite direction.

I may mention that in his order of the 29th of October, 1919 the same learned Judge on practically the same materials and in the same proceedings came to the conclusion that both the mortgage and the sale to Ramprasad were mere shams and fraudulent.

3. The order of the lower Court is set aside. The sale on the 10th of December 1918 of a share in the village of Jhanj by the insolvent to Ramprasad is declared fraudulent and void as against the receiver and is annulled.

The appellants' costs in the appeal and in the proceedings out of which it arose will be paid by the respondent Ramprasad. The pleader's fee in this appeal will be Rs. 50.