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Madras High Court
The Official Assignee Of Madras vs Bangy Abdul Razack Sahib And Ors. on 23 February, 1915
Equivalent citations: 29 Ind Cas 204
Author: S Aiyar
Bench: S Aiyar, Napier


Sadasiva Aiyar, J.

1. The only question in this appeal is whether the sale-deed for Rs. 7,000 executed by the insolvent to his father-in-law, who is now represented by the respondents, can be upheld as against the Official Assignee. In other words, the question is whether Abdul Kadir, the vendee, was a purchaser in good faith and for valuable consideration” within the meaning of Section 55 of the Insolvency Act. If the sale was made for an adequate price and if further the vendor’s debt, which was discharged out of the purchase-money, was equal to or nearly equal to the value of the property, I am not disposed to treat the transaction as fraudulent, or to hold that the vendee is not a vendee in good faith. If, however, the sale was for a price appreciably lower than the real value of the property and if there are facts indicating that the vendee was actuated by the intention to get a much larger benefit for himself than he was fairly entitled to as a diligent creditor or that he conspired with the vendor to assist the vendor to defraud or delay, other creditors, then the vendee cannot be treated as a vendee in good faith.

2. The Rs. 7,000 purchase money is made up of Rs. 5,8l7 and odd due by the insolvent to the vendee on prior dealings and a sum of Rs. 1,150 alleged to have been paid in cash to the insolvent. Though this sum of Rs. 1,150 was paid before the Registering Officer, I think that it was a sham payment as the insolvent’s books do not contain any entry about the payment of this Rs 1,150 and the entries in the account books of the vendee contain suspicious recitals as to the source from which the Rs. 1,150 was obtained for payment before the Sub Registrar. Having also in view the relationship of the parties, I am unable to agree with the learned trial Judge that the sum of Rs. 1,150 was really paid to them solvent. If, however, the value of the property was only “Rs. 7,000, which is the price mentioned in the sale-deed, it may be that, notwithstanding the failure to pay Rs. 1,150, the transaction might be upheld as there was consideration fur the sale to the extent of nearly Rs. 6,000. But on the evidence of the plaintiff’s 6th witness which I see no reason to disbelieve, I am satisfied that the value of the properties sold, encluding the six shops, was about Rs. 13,000 and adding the value of the shops, the total value of the properties sold was about Rs. 14,000, just double the1 price mentioned in the saleded. I am unable to agree with the learned Judge that Rs. 7,000 was fair price, because the sale was in the nature of a forced sale. There is nothing to show that the insolvent could not have sold the properties for more than Rs. 7,000 or that there was such pressure placed by his father-in-law on him that he was obliged to part with these properties at such a great loss to himself.

3. The conduct of the insolvent, from a few days before the date of this sale till he was adjudicated an insolvent in May 1910, also clearly indicates his intention to keep his properties out of the clutches of his other creditors and to defraud his other creditors.

4. Of course, it might be said that though the insolvent might have had a fraudulent intention, the vendee is not a stranger to the insolvent and the probabilities are that the vendee and the vendor were acting together in collusion to defraud the other creditors.

5. Following the principles laid down in the case Chidambaram Chettiar v. Sami Aiyar 30 M. 6 : 16 M.L.J. 427 : 1 M.L.T. 351. I would hold that the sale was wholly void as against the Official Assignee and I would set aside the judgment of the learned Judge and declare accordingly in favour of the Official Assignee, who is entitled to get his costs in both Courts from the respondents. This order is of course without prejudice to the respondents proving their claim as unsecured creditors in respect of the moneys due to Abdul Kadir by the insolvents.

6. Costs to be on the original side scale certified for two Counsel.

Napier, J.

7. I concur.

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