1921 (10) TMI 2 - HC - Insolvency and Bankruptcy

Court rules equity of redemption not 'goods' under Insolvency Act, validates prior transfer, dismisses appeal

The court upheld the judgment disallowing the Official Assignee's application, ruling that the equity of redemption was not considered 'goods' under ... - Issues:Appeal against disallowance of application by Official Assignee regarding a letter of charge, fraudulent preference under Section 56 of the Insolvency Act, order and disposition portion of Section 52, and consideration under Section 55.Analysis:1. The appeal was made against the judgment disallowing the Official Assignee's application regarding a letter of charge by the insolvent firm to Nattukottai Chetties. The letter created a second charge on bales pledged to Egappa Chetty. The main issue was whether the equity of redemption left by the insolvents was at their disposal, leading to forfeiture of the charge under Section 52(1)(c). The Advocate-General argued that the equity of redemption was considered 'goods' under the clause, relying on legal precedents and definitions of 'goods' from various Acts and cases. However, the judgment highlighted that an equity of redemption is not considered 'goods' within the clause.2. Another point raised was regarding a transfer of goods made by the insolvents to A. R. A. Swaminatha Pillai, deemed fraudulent and void under Section 56 of the Presidency Towns Insolvency Act. The argument was made that this act of insolvency should relate back to a previous date, invalidating the second charge given to the Nattukottai Chetties. However, Section 57(c) was cited to show that transfers for valuable consideration before adjudication are valid unless notice of insolvency was present at the time of the transaction. The issue of bona fides was raised, referencing a previous case, but no evidence of lack of bona fides was found in this case.3. In conclusion, the judgment of the learned Judge in Insolvency was upheld, affirming that the second charge was not a fraudulent preference and dismissing the appeal. The court found that the equity of redemption did not fall under the definition of 'goods' in the relevant clause, and the transfer of goods to A. R. A. Swaminatha Pillai was valid as it occurred before adjudication without evidence of lack of bona fides. The appeal was dismissed with costs.This comprehensive analysis covers the key issues raised in the judgment, including the interpretation of legal provisions, application of precedents, and the final decision of the court regarding the appeal.