1938 (10) TMI 9 - HC - Companies Law

Summary

Issues:
1. Validity of assignment in favor of the applicant.
2. Whether allowing a set off would amount to a fraudulent preference.

Detailed Analysis:

Issue 1: Validity of assignment in favor of the applicant
The judgment revolves around the applicant's claim of being a bona fide assignee of a fixed deposit receipt as a security for a loan borrowed from a banking company. The applicant sought to set off the amount due from him against the fixed deposit receipt maturing in favor of the depositor. The court analyzed the documents supporting the assignment, including the deposit receipt with the depositor's signature and a letter from the depositor authorizing the company to apply the amount towards the applicant's loan account. However, the court noted that the applicant failed to provide sufficient evidence of consideration paid for the assignment as required by law. Despite the company retaining the document as collateral security, the court found no explicit assignment in writing as mandated by the Transfer of Property Act. Consequently, the court concluded that the applicant did not prove his status as an assignee, leading to the dismissal of the application.

Issue 2: Whether allowing a set off would amount to a fraudulent preference
The court addressed the argument raised by the Official Liquidators that permitting a set off would constitute a fraudulent preference. The court distinguished a previous case involving unpaid share moneys from the current situation where the applicant sought a set off against his debt. The court opined that if the assignment had been established, a set off should have been permissible. However, since the court found the assignment lacking, the fraudulent preference argument was deemed unsound. Ultimately, the court dismissed the application, emphasizing that the applicant had not met the burden of proving his status as an assignee and ordered costs to be paid.

In conclusion, the judgment delves into the intricacies of assignment law, emphasizing the importance of written documentation and proof of consideration. The court's analysis of the fraudulent preference argument highlights the need for legal substantiation in claims of set off against debts.