The burden of proof lies on the creditor to establish fraudulent intent in property transfers to declare a debtor insolvent; mere non-payment of debt is insufficient.

JUDGMENT :

1. Challenging the order in and by which the court below had declared the 2^nd respondent herein as insolvent and the sale deed executed and registered by the 2^nd respondent in favour of the 3^rd respondent and thereafter by the 3^rd respondent in favour of the 4^th respondent were declared as null and void with a further direction to the 2^nd respondent herein to hand over the property to the 1^st respondent herein, the present appeal has been filed by the appellant challenging the order passed in I.P. No.51/1999.

2. It is the case of the appellant, as pleaded by the 1^st respondent before the court below that a sum of Rs.50,000/- was lent to the 2^nd respondent by the 1^st respondent on 18.9.1996 under a promissory note in which the 2^nd respondent had undertook to pay the said amount along with interest at the rate of 24% p.a. However, the 2^nd respondent did not pay any amount to the 1^st respondent; rather the 2^nd respondent executed a power of attorney in favour of the 3^rd respondent and on the strength of the said power of attorney, the 3^rd respondent sold the property in favour of the 4^th respondent without receiving any monetary consideration only to defeat the rights of the 1^st respondent. It is the further case of the 1^st respondent that the subject property was alleged to have been sold for a sum of Rs.3,10,000/- though the value of the property is more than Rs.7,00,000/- and the said sale will not bind the 1^st respondent and other persons, who have lent money to the 2^nd respondent.

3. It is the further case of the 1^st respondent that the 4^th respondent, in turn, sold the property in favour of the appellant and the act of the 2^nd respondent in selling the property is nothing but to defeat the legitimate rights of the 1^st respondent to realise the amount due and payable on the promissory note. Therefore, praying that the power deed executed by the 2^nd respondent in favour of the 3^rd respondent and the sale of the property by the 3^rd respondent in favour of the 4^th respondent and its subsequent sale to the appellant are null and void and to declare the 2^nd respondent as insolvent, the insolvency petition was filed before the court below.

4. Countering the aforesaid averments, respondents 3 and 4 herein, filed counter contending that the 1^st respondent had not proved the receipt of Rs.50,000/- by the 2^nd respondent. It is the further averment of respondents 3 and 4 that they are strangers and that the 2^nd and 3^rd respondents had entered into an agreement of sale as early as on 17.12.1996 in respect of the subject property for a sum of Rs.3,00,000/- and towards the same, an amount of Rs.1,50,000/- was given initially given by the 3^rd respondent to the 2^nd respondent and the balance amount was to be settled within a period of six months. Thereafter, a sum of Rs.25,000/- and later a sum of Rs.1,25,000/- was given to the 2^nd respondent after grant of extension of time. However, for certain reasons, the 3^rd respondent had sought for return of money as the execution of the sale deed could not be undertaken and as the 2^nd respondent was unable to return the amount, the 2^nd respondent executed a power of attorney in favour of the 3^rd respondent so as to enable the 3^rd respondent to sell the property. Thereafter, on the basis of the power of attorney, the 3^rd respondent sold the property to the 4^th respondent for a sum of Rs.3,10,000/- and, thereafter, the 4^th respondent, vide sale deed dated 18.08.1999 sold the said property in favour of the appellant and the appellant purchased the said property upon obtaining loan from the State Bank of India and, thereafter, the property was sold by the appellant to some third party. It is therefore the averment of the 3^rd and 4^th respondents that the entire transaction had taken on the basis of good intention and there was no ill-will to defeat the interests of the 1^st respondent as alleged and, therefore, the insolvency petition at the behest of the 1^st respondent was contended to be liable f