1. This is an appeal against the order of the District Judge of Godaveri setting aside the sale of two native schooners in favour of the appellant by an insolvent, V. K. Subramania Pillai, a native of Ceylon. The insolvent was carrying on ship-building business in the Godaveri District from 1917 to 1920 and in the course of this business he was purchasing timber and iron goods from merchants in the District and became indebted to them. The appellant is one of such merchants. He was supplying him with iron goods and money. The last promissory note between the appellant and the insolvent Ex. 19, dated 1st October 19, purports to be for Rs. 30,000. Along with it an agreement, Ex. 21 was said to have been executed on the same day giving his ships as security for the money. The ships were sold by transfer of registry before the port officer on 19th January 20, vide Exs. 15 16, and 17. Within a month after this, it is said that the insolvent left the District. Suits were filed against him and attachment orders were obtained. On the 14th April 1920, there was an application for declaring, him an insolvent. He was adjudicated in November 1920.
2. The official receiver referred the question of the genuineness of the sales to the Court and the accounts of the appellant were filed before the Courts. These consist of ledgers, chittas and rough chittas. The lower Court found the day books, Exs. 1, 2 and 4 series as representing true transactions but it suspected the genuineness of Exs. 3, 5, 6, 7 and 8. Ex. 8 purports to be a separate chitta for money-lending business from 24th March 1919. The items of credit in it are items brought from the godown account and all appear in Exs. 8 (a), (b) (c) and (d) and so long as Exs. 8 (a), (b) (c) and (d) are said to be geneuine, there is no point in attacking the genuineness of Ex. 8. We think that Ex. 8 is genuine and is supported by the other account books in the case. It follows that there is no reason to suspect the ledgers. It is clear, therefore, that Subramania Pillai, the insolvent, was .indebted to the appellant to the extent of Rs. 80,000 up to October 1919 and Rs. 42,000, up to January 1920.
3. The only question then that remains is whether the agreement Ex. 21, executed on 1st October 1919, is a genuine document, that is, whether it was executed on the date it bears and was not a collusive later transaction antedated. On this point the appellant has examined three witnesses besides himself. His witnesses 2 and 3 are the attestors of the document and 4th witness who was his clerk, is the writer. Witness 2 is employed in the Imperial Bank as a shroff on a salary of Rs. 85, and he is also related to the appellant. The 3rd witness is a gold-smith who lives in front of his house. The agreement purports to be executed on the 1st October, the date of the document. We do not find any suspicious circumstances in connexion with this document. We think, therefore, that the ships were given as security on 1st October 1919. A creditor is entitled to protect himself and overreach the other creditors apart from the Insolvency Law. Under the Insolvency Law such transactions can be questioned only if within three months before adjudication. Here the document giving the ships as security was more than three months before the adjudication and, therefore, cannot be questioned. The sale of the 19th January may be questioned on that ground. Otherwise we think it is perfectly genuine.
4. It is doubtful whether these ships were worth more than Rs. 42,000 which was the amount of debt due to the appellant. They were sold for Rs. 45,000. The evidence shows that they are worth far less than this amount now. But still, we are willing to make an order in favour of the official receiver so that he may utilise any sum that may be realized beyond Rs. 42,000 for the benefit of the general body of creditors, and this course is agreed to by the learned vakil for the appellant. We declare that, the charge of the appellant is valid and that he will be entitled to possession of these two ships. We give six months time for the official receiver within which to find a proper bargain for these two ships. If he is able to find a purchaser for more than Rs. 42,000, he can pay the amount of Rs. 42,000 to the respondent and take the ships and retain the extra amount for the benefit of the general creditors. If within six months he cannot find a purchaser, the appellant shall retain the ships as absolute property.
5. The appellant has substantially succeeded in this appeal and is entitled to his costs from the official receiver.