Official Receiver of Salem vs Chinna Goundan and Another

Panchapakesa Ayyar, J.—This is a petition by the Official Receiver. Salem, to revise and set aside the order of the District Judge Salem, in

C. M. A. No. 33 of 1854, setting aside the order of the Subordinate Judge of Salem, allowing the petitioner''s petition under Sections 4 and 53 of

the Provincial Insolvency Act and setting aside the alienation by the insolvent in favour of the first respondent, Ghinna Goundan, for Rs. 200. I have

perused the entire records and heard the learned counsel on all sides.

The facts are briefly these. The insolvent had a right, under an agreement dated 9-2-1949, to purchase certain properties, mentioned, in Ex.-A-6,

within two years from that date and, of course, the consequent right to enforce the agreement within three years from 9-2-1951, the expiry date.

He conveyed his rights under the agreement to toe first respondent for Rs. 200 on 15-11-1950. The final Official Receiver filed a petition under

Ss. 4 and 53 of the Provincial Insolvency Act on 13-3-1953 to set aside that alienation.

The learned Subordinate Judge overruled the contention urged by the first respondent that the petition was barred by limitation, and quite rightly.

That point has not been canvassed again before me. He found that the properties covered by the agreement would be worth Rs. 1200 and that the

assignment in the agreement in favour of the first respondent was in fraud of the creditors.

He further held the the Rs. 200, payable under the assignment, though recited as received in cash on the date of the assignment, had not been paid

at all and that the assignment was therefore fraudulent and without consideration. So, he allowed the petition with costs.

The first respondent took the matter in appeal. The learned District Judge, Salem, who heard the appeal, held that though the consideration of

Rs. 200 recited as received in cash, was as a matter of fact, not paid at all, still the assignment itself was for valuable consideration, namely,

conditional on the payment of Rs. 200, and that the consideration had merely failed to be paid.

So, he directed the Rs. 200, covered by the assignment, to be paid to the Official Receiver, Salem, within a month from the date of his order,

namely, 11-10-1954, and directed that, ""on such payment, the appeal should be allowed and the learned Subordinate Judge''s order getting aside

the assignment under Sections 4 and 53 of the Provincial Insolvency Act, set aside, and that if the amount was not paid, the appeal would stand

dismissed with costs.

It is submitted by Mr. N. C. Raghavan, on behalf of the first respondent, that the Rs. 200 had been deposited before the Official Receiver, Salem,

within the time prescribed. It is also admitted by him that the first respondent is enjoying the properties covered by the agreement and assignment,

and taking the income thereof.

Mr. C. S. Swrminathan, the learned counsel for the petitioner. Official Receiver, raised three main contentions. The first was that the learned

District Judge erred in setting aside the finding of the learned Subordinate Judge that there was no consideration at all for the assignment, and that it

was merely a fraudulent recital to cover a gratuitous assignment intended to defraud the creditors. I cannot agree.

It is well settled the in such revision-petitions, the findings of fact cannot be canvassed or Set aside unless they are proved to be perverse or based

on no evidence. That is not the case here. Secondly, Mr. C. S. Swaminathan urged that it is enough to prove that the consideration recited in a

document as having been received is not, as a matter of fact, received to show that the document was a fraulent, one and that it was indented to be

executed gratuitousay and for no consideration.

I am afraid I cannot agree. Many a sale deed is executed with a recital that a consideration is received that day; but when the vendor denies it, he

is allowed to show that the consideration has not been received as recited, and to recover the consideration. But the mere fact that there is a recital

that the consideration had been received, while as a matter of fact, it has not been received, is not enough to show that no consideration wag

intended to pass and that the document was a bogus one executed gratuitously.

Often, in courts, sale-deeds are filed where, the consideration is recited as received, whereas it is not received as a matter of fact. That is why

there is also a lien in favour of the vendor for the unpaid consideration. Specific evidence of a convincing nature must be adduced to show that a

sale deed reciting the payment of consideration was really executed for no consideration'', and that no consideration was intended to be paid.

No doubt, a piece of evidence tending to show that, will be the recital of the receipt of the consideration when no consideration has, as a matter of

fact, been paid as recited. But such a recital will not be conclusive. A court has to go into the whole evidence and come to its own conclusion. The

learned District Judge went into the whole matter and held that though the consideration of Rs. 200, recited in the assignment deed, had not been

paid, the assignment itself was really intended to be executed for a consideration of Rs. 200 and was not intended to be executed gratuitously.

The third contention of Mr. S. C. Swaminathan was that really the properties covered by the agreement and assignment would be worth Rs. 1200,

and that it was against all conscience of the insolvent to assign that right to the first respondent for Rs. 200 & that this inadequacy of consideration

would itself be enough to prove fraud by shocking the conscience of the Court. I cannot agree. There was really no satisfactory proof that the

properties covered by the agreement and the assignment were worth Rs. 1,200. Other evidence showed that they would be worth only Rs. 900 or

even Rs. 500. In such cases, it will be inadvisable for courts to apply the doctrine of inadequate consideration proving fraud by shocking the

Conscience of the court. It is better to apply in such cases the doctrine of ""lucky purchasers'''' adumbrated in some cases.

Often, the ""lucky purchaser"" gets a property for less than 1/4th its value. That, by itself, will not prove any fraud. Only, a careful scrutiny should be

made of the circumstances to see whether the purchaser is a ""lucky purchaser"" or a ""fraudulent purchaser."" Here, the learned District Judge has

held the first respondent to be a ""lucky purchaser"", and I see no reason to interfere with that finding of fact in revision.

But one error was made by the learned District Judge. While directing Rs. 200 to be paid by the first respondent as a condition precedent for

allowing his appeal, and setting aside the learned Subordinate Judge''s order, he has failed to direct him to pay reasonable interest on that amount

from the date of the assignment. It is well settled that no man can keep the income from the property without paying the interest on the

consideration. Just as no man can get the interest as well as tile income.

So the learned District Judge''s order is modified oy directing the first respondent in this case to pay the Official Receiver interest at 12 per cent per

annum on the consideration of Rs. 200, covered by the assignment, from 15-11-1950, the date of the assignment, till the date of deposit of the

sum as modified by me. Mr. N. S. Raghavan, urged that 9 per cent interest will be enough, and that ""12 per cent is excessive. I cannot agree.

Benches of this court have held that 12 per cent interest per annum on an unsecured debt cannot at all be said to be unreasonable, let alone

unconscionable. In the circumstances of this case, and in view of the fact that the first respondent is a lucky purchaser"" who has got the properties

for much less than their real value, any interest less than 12 per cent per annum will be unthinkable.

Mr. N. S. Raghavan is unable to name the day on which the first respondent deposited Rs. 200. He wants also three months'' time from today

to pay the amount as modified by me. If Rs. 200 has been paid to the Official Receiver, and is still with him, that amount will be taken into account

when depositing the balance due under this Judgment and decree within three months from today.

If he has not paid the Rs, 200, he will pay the amount now determined by the. Official Receiver within three months from today on pain of the

learned District Judge''s order being set aside and the learned Subordinate Judge''s order being restored End the first respondent being made liable

for the costs in the appeal before the learned District Judge. In the circumstances, the petitioner will also get his costs in this civil revision petition,

including a vakil''s fee of Rs. 35, from the first respondent.