insolvency

The provisions of sub-s (i) saving the law of insolvency were inserted by the amending Act of 1929.

The object of the law of insolvency is to provide for an equal distribution of assets amongst the creditors,
and its provisions are, therefore, more stringent. A preference to one creditor which would be valid
under s 53 of the Wild would, if the debtor were adjudged insolvent within three months, be deemed
fraudulent under s 56 of the PresidencyTowns InsolvencyAct 1909, or s 54 of the Provincial Insolvency
Act 1920. Similarly, a voluntary transfer may be set aside under those Acts if the transferor is adjudged
insolvent within two years, although it may not offend against s 53 of the TPAct.Again, a transfer by a
debtor of all his property to a particular creditor is not necessarily voidable under this section-9‘ but
under the Insolvency Acts it may operate as a fraudulent transfer or a fraudulent preferenceThe cases of
fraudulent preference falling under the InsolvencyActs must be distinguished from those falling under
this

section.92 ILLUSTRATION

A debtor owed money to a relation A, who, knowing that the debtor was insolvent and that another
creditor B was pressing for payment required the debtor to secure his debt by a mortgage.This he was
perfectly entitled to do for a preference to one creditor is not voidable under s 53 of theTP Act even
though no assests are left for other creditors. But if the debtor had been adjudged insolvent within three
months of the mortgage, the mortgage would have been voidable as against the Official Receiver.93

An assignment of all his property to trustees for the benefit of his creditors is an act of insolvency on the
part of the assignor.94 Insolvency courts have jurisdiction to decide questions of title both under s

7 of the Presidency-Towns InsolvencyAct 1909, and under s 4 of the Provincial Insolvency Act 1920.
Hence, these courts have jurisdiction to decide Whether a

90 Mathura u Hoya Umrao (1949) [LR 28 Fat 97.

91 Venkanna v.official Receiver; Rajmabundry (1935) 68 Mad lJ 57,157 1c 559.1113 1935 Mad 250; Alton
0 Harrison (1869) LR 4 Ch 622. Narasinhamurti v Maharaja of Pttmpur (1941) 2 Mad IJ 99, 54 Mad LW 76,
(1941) Mad WN 513,AIR 1941 Mad 690.

95 Rash Mohan v Krisiodas (1918) 22 Cal WN 982, 47 IC 412.

9“ Karsandas v Maganlal (1902) ILR 26 Born 476, p 484; Lalchand v Husainio 97 iC 257.Ali{ 1927 San 78;
Dutton v Morrison (1810) 17 Ves 193.

transaction is voidable under s 53 of theTPAct on an application made by the Official Assignee, 9‘ or the
Otlicial Receiver,96 as the case may be.'Ihis jurisdiction is not exclusive, and in some cases the court of
insolvency would decline to exercise jurisdiction, and leave the matter to be determined in a regular
suit97 It has also been held that the insolvency courts are the only courts having jurisdiction to avoid a
transfer in preference of a creditor or as not being a transfer in good faith and for value and executed
within two years of the date of adjudication, and that no such question can be raised in a court of
ordinary civil jurisdiction.98 This, however, does not accord with English Law, and the correctness of
these decisions is very doubtful.

(18) Creditor’s Suit

A creditor’s suit to avoid a transfer must be a suit on behalf of not only himself, but the Whole body of
creditors?9 This is because the debtor might otherwise be exposed to a multiplicity of suits by each and
every creditor. It has, however, been held that it is enough if the suit is in substance on behalf of all
creditors even though it is not a representative suit as such. 1 A s'mgle creditor can, of course, tile a suit
if he is the only creditonzThe Calcutta High Court, has held that even a single creditor can file a suit
under s 53.3 A creditor may not

95 Jnanendra Baia Debi v Ojicial Assignee of Calcutta (1925) 30 Cal WN 346, 93 IC 834,AIR 1926 Cal 597;
Ex parte Butters (1880) 14 Ch D 265.

96 Anwar [Gian v Muhammad Khan (1929) ILR 51 All 550, 113 IC 819,A1R 1929All 105; Shikri Prasad
vAzizAli (1922) ILR 44All 71, 63 IC 601,AIR 1922 All 196; Hart Chand Rat vMoti Ram (1926) ILR 48All 414,
94 IC 429,AIR 1926All 470; Cbittammal v Ponnuswami Naicker (1926) ILR 49 Mad 762, 92 IC 573,AIR 1923
Mad 363; Pool Kumari Dasi v Khirod Chandra Das Gupta (1927) 31 Cal WN 502, 102 [C 115,AIR 1927 Cal
474; Radha Krishna v Ojficial Receiver (1932) ILR 59 Cal 1135, 56 Cal IJ

446, (1932) 36 Cal WN 492, 139 IC 323,AIR 1932 Cal 642; Official Receiver 0

Subbayya (1933) 64 Mad [J 397, 1461C 530,AIR 1933 Mad 527; Ram Ditto v Qaicial Receiver 147 IC 1026,
AIR 1934 Lab 365.

97 Exparte Price (1882) 21 Ch D 553; Radha Krishna v Ojj'icial Receiver (1932) ILR 59 Cal 1135.

98 01mm: Assignee of Bombay v Sundarachari (1927) ILR 50 Mad 776, 102 1C 702,AIR 1927 Mad 684
(case under Presidency-towns Insolvency Act); 0mm: Receiver 0 Palaniswami Chem (1925) ILR 48 Mad
750, 88 1C 934,AIR 1924 Mad 1051; Shahzada Begum v Gokul Chand (1927) ILR 2 Luck, 651, 105 1C
50,AIR 1927 Oudh 357;Kaniz

Fatima v Narain Singh (1927) ILR 49 All 71, 98 IC 1001,AIR 1927All 66; Mariappa Pillai 0 Roman Chettiyar
(1919) ILR 42 Mad 32, 52 IC 519; Hiralal v Faiehchand 152 IC 1026,AJR 1934 Nag 271. See also Shikri
Prasad v Aziz Ali (1922) ILR 44All 71,63 IC 601,AIR 1922M! 196.

99 Burjorji v Dhunbai (1892) ILR I6 Bom l; Ishwar v Devar (1903) ILR 27 Born 146;

Hakim Lat v Mooshahar Sahu (1907) ILR 34 Cal 999; Ekleari Ghose v Sideshwar

Ghose AIR 1936 Cal 783; Ayyamperumai v Palaniaa‘i (1958) 2 Mad [J 540;

Harekrishna v Banamali AIR 1971 Ori 1561.

Kishan Dass vAdeshwar Lat AIR 1972 Del 122.

2 State Bank of Travancore v AK Narayan AIR 1967 Ker 171; N Rajyaialeshmamma

0 K Rajamma AIR 1973 AP 53.

5 Union of India v Ram Peary Debi AIR 1984 Cal 215 (reviews case law).

Int

1-