In re DE SARAM

043-NLR-NLR-V-34-In-re-DE-SARAM.pdf


147
AKBAR J.—In re De Saram.
1932Present: Lyall Grant and Akbar J J.
In re DE SARAM.
124^-D. C. (Inty.) Colombo, 3,920.
Insolvency—Dishonesty and. fraud—Refusal of certificate—Unexplained alle-gations—Burden of proof—Court of Appeal disagrees with originalCourt—Powers of Court—Ordinance No. 7 of 1853, ss. 124 and 151.
Where an insolvent has been guilty of wilful falsehood or dishonestyhe is not entitled to a certificate. Where a set of facts is shown, whichunexplained would lead a reasonable man to believe the allegations ofthe opposing creditor, the burden is on the insolvent to relieve himselffrom the inference to be drawn from the facts.
Where the Court of Appeal disagrees with the conclusion of factformed by the Court below, it is in no way fettered by the amount of thesentence which the Court below has thought fit to pass and may absolutelyrefuse an order of discharge, although the lower Court merely suspendedthe certificate.
A
PPEAL from an order of the District Judge of Colombo. The factsare fully stated in the judgment.
Soertsz (with B. F. de Silva), for creditor-appellant.
F. de Zoysa, K.C. (with him Nadarajah and Choksy), for insolvent-respondent.
March 14, 1932. Akbar J.—
The appellant is the opposing creditor in this insolvency appeal andhe is appealing against the order of the District Judge awarding theinsolvent a certificate of discharge of the 2nd class and an absolute andunconditional discharge from all his liabilities. The opposing creditor(hereinafter referred to as the appellant) is the Acting District Judge ofColombo and is the brother of the insolvent, who is a proctor practisingin Colombo for the last 26 years. The facts in this case are somewhatunusual, but it is clear from the large volume of evidence led and themany documents, that the appellant in addition to his ordinaryduties of a Judge, invested his savings by lending money and that he
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AKBAR J.—In re De Saram.
reposed a great deal of confidence in his brother, the insolvent,nqt only in the choice of the borrowers but also in the recovery of theinterest and the principal sums invested. Many of the loans wereguaranteed by the insolvent and were for short terms, the insolventgetting a commission of 2i to 3 per cent, from the persons borrowing,not only for each loan but for each extension, of which there was a largenumber in the case of certain favoured debtors. So that, so long as theborrowers made good in the end, the – transactions were profitable notonly to the appellarit but also to the insolvent
If we turn to the career of the insolvent, he too, in addition to his mainOccupation as a proctor, had several side lines with a view to augmentinghis income. He began practice as a proctor about 26 years ago, andaccording to him had a very successful career, so much so that he beganbuying rubber shares from 1909 to 1920. Apparently these speculationswere successful, for he says he was worth in 1920 about 1£ lakhs rupees,including the value of a house called “ Alderley ” which he bought forRs. 40,000. He borrowed Rs. 30,000 from the appellant and lent it toa Taxi-Cab Co., which loan was afterwards converted into shares. Herepaid his brother, but he lost this Rs. 30,000 as the Company failed.The insolvent borrowed large sums from the appellant on interest andlist I. 4 shows these items, totalling Rs. 155,000 excluding Rs. 42,000still due.
Insolvent himself lent out moneys on interest and I. 485 shows theitems up to October, 1925. According to the insolvent’s evidence hisaffairs appeared to flourish till 1925 for he says “ I was in funds up to1925 ”. The insolvent admitted that he played cards for high stakesand that he was a punter for 10 or 12 years. His evidence was asfollows : —“ I became a punter 10 or 12 years ago. I have placed moneyon Madras and Calcutta races. My brother too was a punter. I haveput as much as Rs. 26,000 on one race and won as much as Rs. 82,000on a single race. I lost this amount on the very day. My volume oflosses and winnings must be about equal. My present income is practi-cally nil ”. Then again he- stated “ I have attended races regularlyand also played card? for. stakes. I did not keep any statement of mywinnings or losses on cards and races. I don’t think I lost on racing butI lost on cards. I used to play poker or bridge. I did not play cardswith Don William or any Maharajah but I did so with my Colombofriends.. I played cards when I had my own money and not when I wasbadly off. I played for very high stakes. I know of people who havelost about Rs. 20,000 or Rs. 30,000 in one night. The moneys I spenton racing and cards playing would have absorbed moneys I earned andmoneys I got by way.,„of interest on loans. ” From July, 1925, toJune, 1928, he embarked on a series of speculations buying raw rubberand selling it on a fluctuating market and the net result of his operationswas that he was a loser in the end of Rs. 58,000.r
It is urged that the money which insolvent lost was all his own money.But was it ? He kept no accounts and his own evidence shows thathe was a most reckless gambler. This is an element which must bekept in mind when his evidence is being weighed, for no books of accountof any kind have been produced by him.
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AKBAR J.—In re De Saram.
The principal person with whom both the insolvent and the appellanthad extensive dealings is a man called Walter Perera, who figures promi-nently in this case. List I. 136 shows the loans made by the appellantto him from time to time.
On July 14, 1926, Walter Perera filed an application under section 2of Ordinance No. 2 of 1918, alleging that the insolvent had lent to thepetitioner various sums of money in respect of which the respondentcharged as his commission (in addition to interest at the rate of 12 to18 per centum per annum), sums ranging from 36 per centum per annumto 48 per centum per annum on the capital sums borrowed. The totalamount so paid as commission the petitioner estimated at Rs. 125,000.All the principal sums borrowed were said to'have been paid exceptRs. 28,000. The petitioner alleged that these transactions were un-conscionable and were induced by undue influence and he prayed forrelief. After this case was postponed for nearly 2 years, the insolventfiled a declaration of insolvency on a date when the case was fixed fortrial, namely, July 28, 1928. He disclosed liabilities to the extent ofRs. 142,465.35 and his only assets were his furniture valued at Rs. 10,000which was sold for Rs. 2,000 and the loan of Rs. 28,000 above mentionedto Walter Perera. The largest item in his liabilities was a sum ofRs. 89,126.91 due to the appellant. This sum was made up as follows: —
3 sums of Rs. 12,000, Rs. 20,000, and Rs. 10,000 borrowed by the
insolvent in July 18, 1925, September 21, 1925, and September20, 1926, with interest, i.e., Rs. 42,000 plus interest from 1925and 1926. It will be remembered that the insolvent himselfadmitted that he was in funds till 1925.
Rs.27,177.71plus interest due in respectofD. C., Colombo,
No. 22,588, from Walter Perera.
Rs. 3,175 plus interest on account of a rubber transaction.
Rs.17,048.66due in respect of D. C. 22,585.Item No. (2) above
isincludedin charge 4 (a) under section 151(3)of the Insolvency
Ordinanceframed by the appellant andisdisclosed in the
documents C. 33 of March 27, 1922, and the letters precedingthat letter, viz., documents I. 124 of August 24, 1921, to
135 and C. 27 to C. 32, and the document? following, viz.,letters C. 34, C. 36, C. 37, C. 38, C. 39, to C. 83 of May 11, 1925, and
500 to I. 504, I. 326, I. 329, &e.
Charge 4 (a) charges the insolvent with contracting the debt No. (2)above by fraud and false pretences, in that he had taken a secondarymortgage instead of a primary mortgage from Walter Perera in favourof the appellant over a property called “ Harburgh ” in Castle street,Colombo, for Rs. 40,000, against the direct instructions of the appellantand by deceiving the appellant and making him believe that the moneyhad been lent on a primary mortgage. In the face of the letter C. 33 ofMarch 27, 1922, from Kandy, and the insolvent’s .reply C. 34 of March 29,1922. from Colombo, showing that the bond had been signed that veryday, and in view of the last paragraph of C. 34 the charge has to mymind been clearly proved.
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AKBAR J.—In re De Saram.
I; 500 of April 1, 1922, giving notice to the real primary mortgageethat his mortgage will be paid up on June 30, 1922, shows that thestatement on the face of the deed signed on March 29, in favour of theappellant and referred to in C. 34 was a false statement to the knowledge.of the insolvent as admitted by 'him in evidence and that it was insertedto deceive the appellant. The Rs. 40,000 was made up of a previousloan of Rs. 20,000 to Walter Perera guaranteed by the insolvent andtwo other payments of Rs. 10,000 each conditional on the bond beinga primary mortgage. C. 37 from insolvent says not a word of themortgage in favour of Mr. Bartholomeusz ; bn the other hand there isa promise to send “ the relative title deeds …. in due course *The appellant called the attention of the insolvent to the non-sendingof the title deeds by C. 43 and C. 46 of July 5, 1923, and the first writtenintimatiori of Mr. Bartholomeusz’s primary mortgage was in C. 47 ofJuly 12, 1923, but with the assurance that till the title deeds were sentafter payment of Mr. Bartholomeusz’s mortgage, the appellant’s loanto Walter Perera was to stand guaranteed by the insolvent. Thisguarantee and the trust which the appellant had always reposed in theinsolvent explain why the appellant made further loans to Walter Perera,most of which were guaranteed by the insolvent, including a loan ofRs. 26,000 by Mrs. de Sarm to Walter Perera which was subsequentlyguaranteed by the insolvent depositing his title deeds inrespect of“ Alderly The original deceit stands clearly proved andthe factthat the appellant was induced to acquiesce in the situation having tothe trust that he had always placed in his brother cannot in my 'opinionin any way lessen the full effect of the fraud.
It is true that the fraud occurred in 1922, but the loss of the summentioned in item No. (2) above to the appellant is directly due to thisfraud because Walter' Perera never paid off the Rs. 17,500 due on Mr.Bartholomeusz’s primary mortgage. This debt of Rs. 40,000 was guaran-teed by the insolvent according to the terms of C. 47 and the insolventincluded the shortfall in bond C. 131 given as a secondary mortgage bythe insolvent over his prcperty on May 31, 1928.
Under charge (1) the. insolvent was charged with wilfully and withintent to conceal the true state of affairs, failing to keep proper books ofaccount in connection with his trade in rubber with John Perera and histrade in arrack with Don William under section 151 (9) of the InsolvencyOrdinance, No. 7 of 1853. Under this charge it is first necessary toestablish that the insolvent was a “ trader ”, or in other words that JohnPerera was a partner with him in respect of the trade of rubber or thathe was merely a nominee of the insolvent and that the trade was reallycarried on by the insolvent with John Perera as a dummy to hide fromthe world the fact that he, a proctor, was engaged in commercial enter-prises. Similarly in the case of Don William in respect of Arrack. Asregard's John Perera the insolverit admitted that he financed him in hisrubber trade, equally sharing profits. This does not however show thathe was a partner with John Perera (section 3 of 21 of 1866) ; but there aremany points which I can take into account under section 21 (4) of 7 of1840 for the purpose of determining whether there was such a partnershipor whether John Perera was not after all a mere nominee. He financed
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John Perera from 1926 up to August, 1927, “ to the tune of thousands ofthousands of rupees”. He began financing John Perera after a'crisisarose in his financial position in 1925 and he did so by backing JohnPerera’s cheques for the purpose of discounting them with professionalmoney-lenders, viz., Sea street Chetties. These are shown in his listof liabilities at Rs. 7,750. When the insolvent held his brother’s powerof attorney in 1927, when the latter went on leave, he was expresslyinstructed to sue John Perera for repayment of a balance sum of Rs. 5,000due to the appellant, which the insolvent failed to do. Instead of takingthese steps the insolvent actually lent Rs. 6,000 of the appellant’s moneywithout express authority on May 25, 1927, which loan it is said wasrepaid on September 6, 1927 (see letters C. 7 and C. 15), and anothersum of Rs. 2,600 on September 26, 1927, which the insolvent repaid on. February 17, 1928, by including it in the sum of Rs. 16,100 referred toin C. 15. It will be noticed that the insolvent paid this sum after he waspressed on the matter by the appellant by his letters C. 16 and C. 17.The fact that this so-called loan to John Perera was repaid apparently bythe insolvent shows I think the identity of interests of John Perera andthe insolvent during this time. The insolvent also admitted that therewas a fire in the'rubber stores of John Perera, and that Perera hadinstituted a case against an Insurance Co. for Rs. 50,000 and that if JohnPerera won his claim (as Walter Perera did when he too had a similarfire in his yard and the Insurance Co. paid up no less than Rs. 60,000 insettlement) he would be entitled to half this sum. Unfortunately thisexpectation did not materialize as John Perera lost his case in the DistrictCourt and on appeal. The insolvent admitted to the assignee that hewas more fortunate with regard to his other client Walter Perera, whopaid over to him Rs. 20.000 out1 of the money paid by the Insurance Co. -The insolvent drew his profits from time to time from John Perera, butfrom December, 1926, to August, 1927, he was unable to draw anythingfrom John Perera nor was he able to get any accounts. It is significantthat in his statement of liabilities and assets; his debts to the Chettiesincurred on account of John Perera are shown amongst the liabilities butnothing is shown as due from John Perera either as the insolvent’s halfshare of the profits or in respect of the moneys borrowed from the Chettieson account of John Perera by the insolvent. The insolvent admitted inhis evidence that he had to get Rs. 3,000 or Rs. 4,000 from John Pererain December, 1926, as his share of the profits. The same remarks applyio the insolvent’s connection with Don William. Here too the connectionbegan in 1926 (September) and ended on September 30, 1927, and heretoo the insolvent financed Don William by cheques discounted byChetties, the whole proceeds of which went into an account entitled theA. R. account and which was operated on by the insolvent alone. Thereis a vague unreality about the exact terms on which this venture wasconducted, which becomes quite apparent when we contrast theinsolvent’s evidence given before the assignee with the evidence givenby Don William in these proceedings. Don William contradicts theevidence given by him in cross-examination in his re-examination. Incross-examination “ he had promised to pay the Chetty ” but in re-examination “ the Chettv:s claim against him is gone ”. The Chetty’s
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claim of Rs. 13,500 is shown among the liabilities, but any claim whichthe insolvent may have had against Don William in respect of the moneyslent to Don William by the insolvent from the A. R. account is left outfrom the realizable assets. Further, the incidents relating to the sum ofRs. 2,750 drawn by the insolvent from the funds of the appellant whenthe insolvent acted as the appellant’s attorney point in my mind to theconclusion that Don William was a mere servant or nominee of theinsolvent who had lent his name to the business. These incidents aredisclosed in the evidence and also in the documents, notably C. 7 andC. 15. The insolvent admitted that he gave his brother’s cheque to DonWilliam and that he left the counterfoil blank. This cheque (thoughissued the day before the appellant arrived in Ceylon and when theappellant’s account in the bank had not been replenished by paymentof appellant’s salary for December) was cashed on January 10, 1928,after such payment, and the pass book was not available to the appellanttill this cheque had been cashed by the insolvent’s clerk Konniah. Andyet we find this sum paid into the A. R. account.
The rubber trade of John Perera and the arrack trade of Don Williamboth begin in 1926 and end in 1927. Both the businesses collapsedhopelessly about the same time ending in complete loss. It is to benoted that the insolvent began these doubtful ventures after 1925, theyear in which he was beginning to feel the pinch in his financial position.
It was in July, 1925, that he began his speculations in raw rubber andI. 335 is a promissory note for Rs. 29,000 given by the insolvent onJuly 29, 1925, to Messrs. E. John & Co., one of the brokers who acted forhim in his speculations relating to rubber.
It is also significant that he borrowed Rs. 12’000 on July 18, 1925,Rs. 20,000 on September 21, 1925, and Rs. 10,000 on September 20/ 1926,from the appellant. In October, 1926, he mortgaged his house to theEastern Bank and from this money he paid his debts including Rs. 16,000to the Turf Club on account of voucher betting and Rs. 7,500 on accountof rubber speculations. I. 485 only shows loans by the insolvent up toOctober, 1925. All these facts show that the insolvent’s financial positionbegan to totter about 1925 and that he thereafter embarked on riskyenterprises hoping to retrieve his position and that he actually traded inrubber and arrack. He has filed no accounts with regard to these twotrades, for the copy of the A. R. account with the Bank (with nothing toshow to whom the sums were paid) and the few arrack return copies, canhardly be called an account. I therefore hold that the insolvent isguilty of the 1st charge under section 151 (9). Even if he was not atrader, he should have disclosed the debts due to him from John Pereraand Don William under charge (2) in respect of moneys lent, for thecharge is wide enough to include such debts, even if there was no partner- ■ship between the- insolvent and John Perera in respect of the trade inJ rubber and between the insolvent and Don William in respect of thearrack rent. The words “ with whom he carried on business in partner-ship ” can be regarded as merely descriptive and therefore as meresurplusage. I do not agree with the District Judge that charge (2)relates to profits which could only result from a partnership.
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Charges 4 (b), (c), and (d) relate to a speculation in buying and sellingrubber on a fluctuating market indulged in by the appellant and Mr.Bartholomeusz, Barrister-at-law, on the instigation of the insolvent inJuly, 1925, when the latter’s financial position was beginning to bedesperate. In spite of a previous unsuccessful venture in the samefield the appellant attempted a second time to try his fortune in therubber market in July, 1925. It is clear from Mr. Bartholomeusz’sevidence that he was not told of the fact that the appellant was alsoa co-adventurer at the beginning, when Mr. Bartholomeusz ratherhesitatingly agreed to try a modest Rs. 3,000 and to limit his losses tothat sum. The result of all the evidence on this matter and the documentsis to point to the conclusion that the insolvent dragged these two intothe venture with the object of getting funds from them to help him inhis own speculations. He succeeded in getting Rs. 4,500 from theappellant and Rs. 3,000 from Mr. Bartholomeusz on July 14, 1925 (seeI. 467 and I. 468).
The rubber was sold on July 29 at a loss. On August 11 he got Rs. 1,000from Mr. Bartholomeusz and without disclosing this fact he got Rs. 7,000from the appellant the same day. On September 4 he got a further sum• of Rs. 1,000 from Mr. Bartholomeusz. As the rubber was sold on July29. 1925, on his orders the insolvent must have known th$ amount ofthe loss on the 10 tons bought by the appellant and Mr. Bartholomeusz(see I. 467) and that the appellant by paying Rs. 7,000 on August 11was paying more than his share of the loss. And yet to letters C. 84 ofFebruary' 4. 1926, I. 121, C. 88, C. 85, C. 87, C. 89, C. 90, no reply is sentby the insolvent. I. 467 of October 12, 1925, and I. 468 of the same dateare addressed to the insolvent and show how the account stood withMessrs. E. John & Co. C. 91 or I. 2a of June, 1926, and I. 2b and I. 2care addressed to the insolvent and the loans of Rs. 1,000 .each by Mr.Bartholomeusz are not shown in the rubber account of Bartholomeuszand the appellant but in the accounts of the insolvent. These accountswere so made up at the instance of the insolvent according to Mr. Pater-son’s evidence and yet he sends no reply to the letters C. 93, C. 94, C. 95, C.96, C. 97, C. 98, C. 99, C. 100, C. 101, C. 102, C. 104 of March 1, 1927.By C. 103 of March 1, 1927, the appellant having come to the end of hispatience, wrote to Mr. Bartholomeusz direct. The evidence and theletters C. 105, C. 106, C. 107, C. 108, C. 110, C. Ill, C. 112, C. 113,C. 114, C. 115, C. 116, C. 117, C. 118, C. 119, and C. 120, show how the matterended..
In my opinion the charges 4 (b), 4 (c), and 4 (d) have been proved.They are all offences under section 151 (3) of the Ordinance. In the endthe insolvent admitted his liability for a sum of Rs. 3,175 to the appellantand this is the sum in item (3) of the debts due by the insolvient to theappellant mentioned by me in an earlier part of my judgment.
The insolvent was badly in want of funds to meet the liabilities on hisown speculations, especially the liability on promissory note I. 335 which,it should be noted, was paid up on September: 19, 1927, and he obtainedthe sum of Rs. 7,000 by inducing the appellant to believe that it was aloan to Mr. Bartholomeusz. He also obtained two sums of Rs. 1,000each from Mr. Bartholomeusz which were entered in his own account
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AKBAR J.—In re De Saram,
when the accounts were settled in June, 1926 (see I. 2a, I. 2b, and I. 2c),and this fact was hidden by the insolvent from the appellant for overone year (see C. 93 and the subsequent letters ending with C. 118 ofMay 6, 1928, and C. 120 of May 9, -1928). After admitting his liability.for this amount oh May 9, 1928, by C. 120 and after the appellant hadwritten C. 123 on May 15, 1928, in which the appellant threatened himwith the charges in charges 4 (b) and 4 (c), the insolvent filed hisdeclaration of insolvency on July 28, 1928.
Charge (3) and charge 6 (c) were not pressed in appeal, and I do notthink charges (5), (7), and (8) have been proved. As regards charges6 (a), (b), and (d) although they do not appear to come under section 151of 7 of 1853, there is the general section 124, under which a Court canalways take into account the conduct of the insolvent in relation to hisestate. Charge (2) which I have already discussed can also be broughtunder section 124 or section 127. As regards the facts alleged undercharges'6 (a), (b) and (d) there can I think be no doubt. We have theexpress evidence of the appellant that the withdrawals of the sumsmentioned in C 7 of January 20, 1928, which the insolvent had drawnfrom the appellant’s account were unauthorized. The power of attorneyalthough a full one only authorized the attorney to invest the principal’smoney on proper security. The fact that the insolvent helped himselfto the money because the appellant had not hesitated in the past to lend.money to his brother is no answer to the charge that the moneys weredrawn without the authority of the principal. Neither does the factthat the insolvent repaid all these items on February 9, 1928, and theitem of Rs. 2,750 on February 12, 1928 (see C. 21 and C. 23). affect thequestion. Letter C. 16 of January 27, 1928, supports the testimony ofthe appellant that the loans were unauthorized, for that letter definitelystates that the appellant had expressly directed the insolvent to let themoney remain in the Bank.- The insolvent never protested in writingagainst this definite assertion by the appellant in C. 16, but on thecontrary he paid in all the sums with interest in full when by C. 17 ofJanuary 30, 1928, the appellant threatened him in effect with, seriousconsequences. I think the charges 6 (a), (b) and (d) have been fullyproved, especial^ 6 (d). The insolvent, when his position .was almosthopeless, borrowed Rs. 30,000 from the Imperial Bank in 1927 and hespeculated in rubber with Messrs. Philips & Co. by drawing a cheque intheir favour for Rs. 25,256 and the loss on this deal was Rs. 5,000. Icannot see how it can be urged that this is not reckless conduct. It isfrom this sum of Rs. 30,000 that the insolvent says he repaid his brotherthe Rs. 16,100 which he had misappropriated. It is true that the insolventpaid up all interest on the Rs. 42,000 he had borrowed up to December,1927, but this was on December 22, 1927, and January 4, 1928 (see C. 137and C. 138). The payments were made before the discovery by theappellant of the unauthorized withdrawals (see C. 7 of January, 1928).This conduct of the insolvent shows that he had discovered early aweakness of the appellant. The documents show that the most effectivemethod of conciliating the appellant, which the insolvent had discovered,was to send the interest for a new extension whenever the appellant wasvociferous in demanding the repayment of a loan (made even to others)
AKBAR J.—In re De Saram
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1SS
which was overdue, and if the appellant still persisted, the insolvent hadonly to guarantee the extension.
The insolvent’s conduct, to my mind, has been most unsatisfactory anddishonest on the general charge under section 124 and the specific chargesI have mentioned above. He has produced no books, not even of hisearnings in his profession. Mr. Wilson’s evidence regarding the dis-appearance of 2C1—2C7 is entirely hearsay because Mr. Mack was notcalled as a witness. 1 cannot understand how these books disappeared.If the insolvent had rich and influential clients as he stated, it cannotbe that none of them owed any money for professional services when hefiled his declaration of insolvency on July 28, 1928. No such sums areshown in his list of assets.
Before discussing the law on the subject I must say a few words withregard to the loan of Rs. 26,000 to Mrs. de Saram, the shortfall on whichwas Rs. 17,048.66 and which sum was included in bond C. 131. Thedocuments I. 408 to I. 466 show that this loan was guaranteed by theinsolvent, and that the security was to be by way of a primary mortgageinstead of the tertiary mortgage which the insolvent ultimately securedfor the benefit, of the appellant. The correspondence also shows howgrossly the insolvent delayed in taking steps to recover this sum fromWalter Perera and how the services of Messrs. F. J. & G. de Saram hadto be requisitioned by Mrs. de Saram in the end in May, 1928. Thisexplains why the insolvent consented to include the shortfall on thisitem in his bond C. 131 of May 31, 1928.
In the result I am of opinion that the insolvent is guilty of the followingcharges:—
fa) Charge (1) (see section 151, sub-section (9), of 7 of 1853) in that heactually traded in rubber with John Perera and in arrack withDOn William and that he has wilfully and with intent to concealthe true nature of his dealings with them omitted to keepproper accounts. All the three elements required by the sub-section have been established here unlike the case reported in7, Tambiah’s Reports, p. 71.
Charge (4) (see section 151, sub-section (3) ) in that the insolvent
contracted the liability to pay to the appellant the sum ofRs. 27,305.04 in respect of D. C. 22,588 owing to his fraud andfalse pretence in taking a secondary mortgage from WalterPerera over the property “ Harburgh ” to secure a debt ofRs. 40,000 against the express instructions of the appellant andin thereby deceiving and making the appellant believe that themoney had been lent on a primary mortgage.
Charge%4) (b) (see.section 151 (3) ) in that the insolvent contracted.
the debt of Rs. 3,175 and Rs. 17.40 interest due to theappellant by fraudulently deceiving the appellant to believe-that a loan of Rs. 7,000. was required by Mr. Bartholomeusz.
.«) Charge (4) (c) (see section 151 (3) ) in that the insolvent contractedthe debt specified in (c) above because he had misappropriatedand applied to pay his own liabilities the sums of Rs. 4,500,Rs. 3,000, Rs. 7,000, and Rs. 2,000 contributed by the appellant
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and Mr. Bartholomeusz on the express understanding thatthey were to be utilized on their joint contract to purchase andsell ten tons of rubber. I have indicated the evidence in detailto show why the insolvent had one account with Messrs. E. John& Co. in respect of his own speculations and those of the jointspeculation of Mr. Bartholomeusz and the appellant. I. 468dated October 12, 1925, and the insolvent’s conduct during thewhole period show, I think, that the charge has been proved.
(e) Charge (4) (d) (see section 151 (3) ) in that the insolvent incurredthe debt mentioned in (c) above owing to the fact that hemisappropriated • the two sums of Rs. 1,000 each paid byMr. Bartholomeusz _ on August 11 and September 4, 1925.They were not shown in the accounts he submitted in June,1926, to the appellant and he withheld the fact of the paymentof Rs. 1,000 on August 11, 1925, from the appellant in order toinduce the latter to pay Rs. 7,000 as a loan to Bartholomeusz.
These are all offences under section 151 of 7 of 1853. In addition tothese charges I find that the insolvent is guilty of charges 6 (a), 6 (b), and6 (d) which can be taken into account under section 124. Further, evenif the insolvent was not a trader under charge (1) he would be guiltyunder charge (2) in that he concealed fr'.m the Court, debts due to himfrom John Perera and Don William in respect of their trade in rubberand arrack respectively, which charges can be taken into account undersection 124 and section 127. So far as these latter charges are concernedunder section 124, charges 6 (a), 6 (b) ,6 (d), and 2 contain the particularsrequired according to the ruling in the case of Marikar v. ArnnachalamChetty
It has been held in ex parte Ryder (26, L. J. Bankruptcy, p. 69) underthe English Act that stock-jobbing acts even though they may not bestrictly “ gaming and wagering ” could not be overlooked by the Courtwith regard to the bankrupt’s general conduct, on a question of theissue of a certificate.
In the case of ex parte Dobson (25, L. J. Bankruptcy, p, 17) it was heldthat a Court must consider not only the bankrupt and his affairs, butalso the interests of society and that where he has been guilty of wilfulfalsehood or sheer dishonesty he is not entitled to a certificate. Undersection 151 of 7 of 1853 where it appears to the Court that the insolventhas committed any of the offences specified therein, “ the Court shallrefuse to grant a certificate or shall suspend the same for such time as itshall think fit
In William on Bankruptcy, s. 26, p. 116, there is a reference to thepower of the Court to refuse the discharge where the bankrupt has beenguilty of gross misconduct as a trader although he is not guilty of anyof the specific offences mentioned in the section. There is a similarstatement of the law (on the authority of re Badcock, 3 Morr., p. 138) in2 Halsbury’s Laws, s. 436. And in paragraph 437, I find this passage“ when the reasons assigned by the Court beiow for coming to theconclusion that a bankrupt has not been guilty of misconduct are
' IS N. L. R. 75.
137
Rapiel v. Peiris
illusory, or such as the Court of Appeal can see to be wrong, it is theduty of the Court of Appeal to do what the Court below should havedone Further, where the Court of Appeal disagrees with thje co-sion of fact formed by the Court below, it is in no way fettered by theamount of the sentence which the Court below has thought fit to passand may absolutely refuse an order of discharge, although the Courtbelow merely suspended it. See also re Goonasinghe (5 Times of Ceylon
R., p. 152).
In the case now before me, in my opinion, the Court below came to anerroneous conclusion on the facts. It has been held locally in Mohamaduv. Ramasamy Chetty 1 that the onus does not lie entirely on the opposingcreditor to prove that the insolvent has committed an offence and that theresponsibility was cast on the Court to inquire into the suspiciousfeatures in the case. In that particular case in the absence of satisfactoryexplanation by the insolvent his conduct was held to be fraudulent.
In an American Text Book (1 Collier on Bankruptcy, p. 510) it is statedthat though the burden of proof was on the opposing, creditor, where aset of facts is shown which unexplained would lead a reasonable man tobelieve the allegations of the objector the burden was on the bankruptto relieve himself from the inference to be drawn from the facts. Thisof course is the ordinary rule of evidence, that when any fact is withinthe special knowledge of a party, the burden of proving those facts is onhim. Collier goes on to say that- it is not necessary that the allegedground for refusing a discharge be proved beyond-a reasonable doubt asin the case of the trial of a criminal offence, although, the conscience ofthe Court should be satisfied by clear and convincing testimony that thebankrupt is not entitled to his discharge. Whether this last statementof law is right or not it does not matter in the case before me. Here theappellant has placed certain facts which prove the commission of theoffences I have mentioned by the insolvent, and the explanations givenby the insolvent in his defence are so unconvincing and unsatisfactorythat I have no doubt that he is guilty of these charges.
That being so, the appeal is allowed with costs. The order of theDistrict Judge ordering the insolvent a certificate of the 2nd class is setaside and I direct that a certificate of conformity be refused.
Lyall Grant J.—Agreed in a separate judgment.
Appeal allowed.
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