N. SUBRAMANIA IYER versus THE OFFICIAL RECEIVER, QUILON

Citation: [1958] 1 S.C.R. 257 · Decided: 24-05-1957 · Supreme Court of India · Bench: B. JAGANNADHADAS · Disposal: Appeal(s) allowed

Judgment (excerpt)

S.C.R. 
SUPREME COURT REPORTS 
N. SUBRAMANIA IYER 
v. 
THE OFFICIAL RECEIVER, QUILON 
(JAGANNADHADAS, B. P. SINHA and 
GOVINDA MENON JJ. 
257 
Insolvency-Receiver's application for annulment 
of transfer 
-Onus-Finding in insolvency proceeding, if res judicata-Good 
faith-Test-Travancore 
Regulation 
VIII of 
1090 
( = 1915) 
s. 35(iii)-Travancore General Clauses Act (II of 1072= 1897), s. 6(2) 
-Indian General Clauses Act (X of 1897), s. 2(22). 
An usufructuary mortgage in favour of the appellant's 
predecessor-in-interest was sought to be annulled by the Official 
Receiver as having been executed within two years of the adjudi-
cation of the mortgagors as insolvents, under s. 35(iii) of the 
Travancore Regulation VIII of 1090 ( ~ 1915) as not having been 
entered into in good faith and for valuable consideration. By an 
issue framed in the case the burden of proving affirmatively that 
the transfer was supported by good faith and valuable considera-
tion was thrown on the transferee. There was also a preliminary 
objection by the Receiver that the usufructuary mortgage having 
been found to be an act of insolvency in the insolvency proceed-
ings, that finding was res judicata between him and the transferee. 
The trial Judge found in favour of the Receiver. On appeal by 
the transferee, the High Court affirmed the order of the trial 
Judge allowing the Receiver's application for annulment solely on 
the ground that the appellant had failed to prove his bona fides 
in the sense that he had entered into the transaction without due 
care and attention within the meaning of s. 2(6) of the Travancore-
and Cochin General Clauses Act. 
Held : that the courts below had erred in placing the onus on 
the transferee and their orders must be set aside. 
It . is the settled law in insolvency proceedings that the-
burden of proving that a particular transaction is not supported. 
by good faith and valuable consideration lies on the Official Receiver 
who challenges the transaction. 
Official Assignee v. Khoo Saw Cheow, (1931) A.C. 67, Official 
Receiver v. P.L.K.M.R.M. Chettyar Firm, (1930) L.R. 58 I.A. 115 
and Pope v. Official Assignee, Rangoon, (1933) L.R. 60 I.A. 362, 
relied on. 
Held further, that there was no scope for the application of 
the principle of res judicota in the instant case as the matter that 
directly arose for determination in it was whether the impugned. 
transaction was not bona fide or for valuable consideration so far 
as the transferee was concerned and that was not in issue in the 
33 
1957 
May 24· 
1957 
N. Subramanja 
Iyer 
•• 
r;.. Ojffcia/ 
Receiver, 
Qui/on 
258 
SUPREME COURT REPORTS 
[1958] 
insolvency proceedings, nor had he been found in such pro-
ceedings to be privy to any act of insolvency intended to defeat 
or delay the creditors. 
Mahomed Siddique Yous11f v. Official Assignee of Calcutta, 
(1943) L.R. 70 I.A. 93, considered. 
The crucial question for decision ia 
such a 
case \vou1d be 
\Vhether the transferee was wanting in hon.1 jicies in rc3pxt of the 
transfer sought to be annulled and the c,11-rcct test ,·..-ou]d be the 
one of honesty as laid down by s. 2(22) of the Indian General 
Clauses Act and not that of due care and ~!ttcntion as col)ten1plated 
by s. 2(6) of the Travancore and Cochin General Clauses Act. 
CIVIL APPELLATE 
JURISDICTION : Civil 
Appeal 
No. 165of1953. 
Appeal by special leave from the judgment and 
order dated October 3, 1950, of the former Travancore 
Cochin High Court in A.S.No. 288 of 1120 (T) ari,ing 
out of the judgment and order dated the 3rd Thulum 
1120 of the 2nd Judge, District Court Quilon 
in 
C.M.P. No. 2391 dated 15-8-1103 in I.P. 3/1100. 
K.S. Krishnaswamy Iyengar, 
Alladi Ku,9puswami 
and M. S. K. 
Sastri, for the appellant. 
N. C. Chatterjee, M. R. Krishna Pillai r:nd Sardar 
Bahadur, 
for respondent No. 1. 
1957, May 24. The Judgment· of the court was 
delivered by 
Sinha 1. 
SINHA J.-This appeal by special leave is directed 
against the concurrent orders of the Courts 
below 
allowing the Official Receiver's application under s. 35 
of Travancore Regulation VIII of 1690 ( = 1915), to 
which we shall refer in the course of this judgment as 
the Insolvency Regulation, for annulling the usufruc-
tuary mortgage (Ex. I) for Rs. 75,000 dated August 18, 
1924, executed by a number of persons who 
may 
now be conveniently described as the insolvents 
The 
main 
question for determination in this appeal on 
behalf of the transferee is whether the t

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