544 DE KRETSER J.—Hamid v. Colombo Apothecaries Company, Limited.
1942• Present : Soertsz and de Kretser JJ.
HAMID v. COLOMBO APOTHECARIES COMPANY,
59-—D. C. (Inty) Nuwara Eliya, 31.
Insolvency—Trader leaves the country after transferring property—Intent todefeat and delay creditors—Act of Insolvency.
—-^here the adjudication of a person as insolvent is based on the debtof the pfetitioning-creditor to which he swears in his affidavit and thedebt is admitted, ho further proof of the debt is necessarv.
'-^iyhere a trader leaves Ceylon after he had transferred his propertyto ahother and remains away from the Island for some time,—
Held, that it was a fair inference that ha had done so with the intentionto defeat and delay his creditors and that he had committed an act ofinsolvency.
The expression “ fraudulent transfer ” explained.
.4 PPEAL from an order of the District Judge of Nuwara Eliya.
N. Nadarajak, K.C. (with him H. W. Thambiah), for insolvent, appellant.
H. V. Perera, K.C. (with him E. F. N. Gratiaen and Ivor Misso), forrespondent.
,^Cur. adv. vult.
September 24, 1942: de Kretser J.—
The appellant seems to have carried on business' in Nuwara Eliyaunder the name of “ K. Abram Saibo & Company ”. In January, 1942,he was indebted to the respondent in the sum of Rs. 4,475.93 and interestfor goods sold to him between August, 1941, and December, 1941.
By four deeds dated November 3, 1941, and January 14, 1942, allattested by V. Ponnasamy, Notary Public, he transferred his .entire assets,including his stock-in-trade and credits, to one K. Seyed Ibrahim,for Rs. 51,786.13, which was to be paid at the rate of Rs. 1,250 a month.He left for India about the end of January, 1942.
DE KRETSER J.—Hamid v. Colombo Apothecaries Company, Limited. 545
On January 26, 1942, his proctor Mr. Ponnasamy, addressed a letterto the respondent informing him of a proposed meeting of creditors to beheld at his office on February 9, 1942, for the purpose of seeing if theywould accept composition and inviting him to be present. His liabilitiesamounted to Rs. 134,793 and accordingly only 40 cents in the rupeewould be available, said Mr. Ponnasamy, who did not, however, disclosehow his client, the appellant, would be able to pay even this sum. Evenassuming that Seyed Ibrahim was solvent and remained solvent and paidhis instalments regularly, and presuming also that the appellant who wasin India would honestly meet his creditors, they would have to takeeven the 40 cents in the rupee in instalments, extending presumably overthree and a half years.
The letter disclosed that the appellant had had to “ run away to Indiaon several occasions during the past three years ”, owing to chronicdiarrhoea, leaving his business in the hands of others; that when hereturned from India in December he was bedridden and had recentlyleft for India for treatment. So that on previous visits to India thebusiness remained his and was available to his creditors. The letteralleged that the “ transfer ” to Seyed Ibrahim (note the singular) was“ in order to safeguard your interests and in order not to allow ihebusiness and the stock-in-trade and credits to be wasted Earlier italleged that, owing to his (appellant’s) inexperience and the strain ofprevious debts he had been incurring losses daily. These losses, pre-sumably, were not due to his ill-health or the greater incompetence ofthose he left in charge of the business.
It is difficult to imagine that a creditor could receive a more alarmingletter.
On May 19, 1942, the respondent set out the fact of his debt andrecited all other facts known to him and, annexing the letter he hadreceived, petitioned for the adjudication of the insolvent. Order wasmade accordingly, and May 29 was the date fixed for showing cause. 'On that date, Mr. Ponnasamy undertook to “file papers”, on June 6,on which date he filed his proxy and a statement,of objections ; he statedthat he was unable to proceed to inquiry and moved for a postponement.The application was objected to, and the trial. Judge made order asfollows : —
“ Today is the fourteenth day after the service of the notice of
adjudication, and cause, if any, should have been shown to-day at the
latest. The order of adjudication will stand.”
On June 8, Mr. Ponnasamy filed a medical certificate, issued in Indiaon June 3, to the effect that the insolvent could not attend for twomonths. There is no note of any application by him based on thiscertificate.
On June 10, a notice under section 44, issued on K. Seyed IbrahimSaibo (the transferee), was reported not served as he was said to be inIndia.
On June 15, a petition of appeal was filed. This questioned theregularity of the summons having been left at the place of business,a procedure not questioned at the hearing and amply justified by section30, and it also raised the point that the material before the court was
546 DE KRETSER J.—Hamid v. Colombo Apothecaries Company, Limited.
insufficient and the objections had not been inquired into. It invokedthe medical certificate, although this had been produced only two dayslater and-no application had been based on it.
Two points were urged before us, viz.: —
The Judge should have had viva voce evidence for the respondent
before confirming the adjudication.
The material disclosed no act of insolvency.
In support of (a) the case of Supramaniam Chetty v. Gaffoor & Co.'and In re the Insolvency o/ Robert de Zoysa1 were cited. Without goinginto the question as to how far the English cases relied on were governedby Rules made under the English Act, it is enough to say that the-procedure indicated is one which may well be followed. The question iswhether anything more need have been done in the present case.
Section 16 of our Ordinance expressly invokes the forms given in theSchedule. According to the form given, the petitioning-creditor is notrequired to state specifically the act of insolvency which he relies on buthe states that he has been informed and verily believes that the said A. B.did lately commit an act of insolvency, and the accompanying affidavitis required to state in general terms that the several allegations in thepetition are true. The petitioning-creditor therefore only swears to thedebt owing to him, and for the rest he may go on information he believes.When a substantial dispute arises it is only reasonable and proper thathe should lead specific evidence and satisfy the court. This the Rulesin England provide for.
Now, in this case the statement of objections admitted the debt. Nofurther proof was needed. . It also admitted that the appellant" hadceased to carry on business after January, 1942. It denied . that theletter disclosed any act of insolvency. That was a matter for the Court toconsider. The Court had already decided that acts of insolvency weredisclosed and Mr. Ponnasamy had addressed no argument on the point.The statement denied that the transfer was fraudulent and made withintent to defeat his creditors but sai^l nothing about delaying his creditors.It stated with reference to only one of the- deeds that it conveyed thestock-in-trade for valuable consideration and that the consideration hadbeen utilized for paying creditors. It did not specify the creditors,and the respondent had not been paid anything. No information wasgiven as to the consideration on the .other transfers. I fail to see how therespondent could have advanced his case by going into the .witness-box'The appellant, on the other hand, might have disclosed some factsknown to. Mr. Ponnasamy, who was acting for him, and have called-the transferee, if he were not himself in India.
The simple position therefore is whether the admitted facts discloseacts of insolvency. A man is presumed to intend the natural consequencesof his acts. The admitted acts are capable of more than one constructionand no argument was addressed to the Judge to show that his view of themwas wrong. Having heard Counsel, I am unable to say that the Judgewas wrong. The appellant had left Ceylon and remained away for somemonths. He had transfered all his property. The first would have1 3 S. C. D. 5. ,2 2 C. L. W. 307.
JAYETILEKE J.—Punchi v. Bandi Menika.
been an act of insolvency if done with intent to defeat or delay hiscreditors. In my opinion, a judge may form the opinion that he intendedboth when he adopted a course he had not adopted previously and whenhe did so without notice to his creditors or any attempt at compositionbefore his transfers. The transfers, besides being made with the intentabove specified, should be fraudulent. “ Fraudulent ” in this connectionshould be given the meaning it had in the corresponding English Statute.
Archbold, in his Law an Practice of Bankruptcy, sets out the law onpages 55 to 62. Under the term “ fraudulent ” were classed all. voluntaryconveyances without valuable consideration which were rendered voidas against creditors by certain statutes and all conveyances which aCourt of Equity would declare fraudulent, as well as all cases whichappear from the facts themselves to be, or which from the conclusionjf law arising from these facts would be deemed to be fraudulent asagainst third parties, “ however fair they might be as between the partiesthemselvesSo, if a trader makes a conveyance of all his property totrustees, in trust for his creditors, although he did not in fact intendto delay or defeat his creditors, yet such being the necessary consequenceof an assignment of all his property, the law will presume that to have beenhis intention. It is worse when the property is not conveyed to trustees.Other cases are cited by Archbold;
I am unable, therefore, to say that no act of bankruptcy has beendisclosed or proved, and I fail to see that the adjudication can beheld to have been wrongly made.
The appeal is accordingly dismissed with costs.
Soertsz J—I agree.
HAMID v. COLOMBO APOTHECARIES COMPANY LIMITED