The Chartered Bank V. Rodrigo

1940     Present: Howard C.J. and Keuneman J. 

THE CHARTERED BANK v. RODRIGO.  

68-D. C. Colombo, 8,482. 

Insolvency-Fraudulent preference-Deposit of scrip by insolvent with Bank- Authority to sell-Claim by assignee to proceeds of sale-Right of Bank. 

Where the plaintiff Bank, with whom scrip relating to shares in a company was deposited by the first defendant by way of security for an overdraft with written authority to dispose of the shares, sold the shares and appropriated the proceeds in reduction of the overdraft,- 

Held, that there was no fraudulent preference of the Bank, and that the Bank was entitled to the proceeds of the sale as against the second defendant, the assignee of the insolvent estate of the first defendant who claimed them for the benefit of the insolvent estate. 

APPEAL from a judgment of the District Judge of Colombo. 

N. Nadarajah (with him E. B. Wikremanayake), for second defendant, appellant. 

H. V. Perera, K.C. (with him N. K. Choksy and Miss Metha), for the plaintiff, respondent. 

March 6, 1940. HOWARD C.J.-

 This is an appeal by the second defendant who is the assignee of the insolvent estate of the first defendant from a judgment of the District Judge of Colombo, dated December 12, 1938, in favour of the plaintiff for the sum of Rs. 108,631.98 with costs. The facts so far as material to this appeal are as follows:-By a bond or obligation No. 747 dated December 20, 1934, the first defendant gave to the plaintiff a floating security to secure the payment of sums then owing and of future over­drafts over certain immovable property set out in the schedule. As further and additional security to the plaintiff for the payment of moneys owing under bond No. 747 the first defendant deposited with the plaintiff by way of pledge and hypothecation the share certificates specified in the second schedule to the plaint together with relative transfers executed by the first defendant. In the District Court the appellant did not contest the whole of the plaintiff's claim. He maintained (1) that the deposit of the share certificates and transfers specified in schedule " A" to the amended answer amounted in law to a fraudulent preference of the plaintiff by the first defendant and (2) that as assignee in insolvency he was entitled to a declaration as against the plaintiff that a sum of Rs. 6,709.09 specified in schedule " B " to the amended answer should be paid to him for the benefit of all the creditors of the insolvent estate of the first defendant. It was also claimed by the appellant that the goods and property specified in schedule " B " of the amended answer were surren­dered by the first defendant to the plaintiff in circumstances amounting to a fraudulent preference of the plaintiff by the first defendant. The learned District Judge has answered all t

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