Sharma v Ram (C.A. No. 41/35.) [1935] EACA 142 (1 January 1935)

APPELLATE CIVIL.

Before WEBB, J.

DALIP CHAND AND MATHRA DASS SHARMA, Appellants (Original Plaintiffs)

$v.$

FEROZ DIN AND HANSRAJ S/O NANAK RAM, Respondents (Original Defendants).

C. A. No. $41/35$ .

Fraudulent Transfer of Businesses Ordinance, 1930-Transfer of business-No Notice published-Judgment against transferor -Execution against goods of transferee-Necessity for action. against transferee—Practice—Order under O. 6 r. 29—Appeal.

In execution of a judgment obtained by the respondent, Feroz Din, against the respondent, Hansraj, certain property of the appellants was attached. The appellants gave notice of objection under O. 19 r. 55, and in reply thereto the respondents filed. defences setting out that the appellants had purchased the business of Hansraj without having published notice of the transferas required by Ord. 55/30. Upon the matter coming before the Resident Magistrate the advocate for the appellants applied under O. 6 r. 29, that the defences be struck out as disclosing noreasonable answer; the Magistrate refused the application, holding that, under section 3 (1) of Ord. 55/30, in the absence of notice of the transfer of a business, the transferee stands in the shoes of the transferor and that execution can be levied against the goods of the former without a separate action against him by the original plaintiff.

- $Held$ (23-12-35).—That, where it is sought to make the transferee of a business liable under section 3 of Ordinance 55/1930 for debts of the business incurred by the transferor, a separate action mustbe brought against him by the creditor. - Held Further (23-12-35).—That an order refusing, equally with an order granting, an application under O. 6 r. 29 is appealable as of right.

Gautama, for the respondents, took the preliminary point that leave to appeal had not been obtained. $0.6 \dot{r}$ . 29 says that "all orders made in pursuance of this rule shall be appealable as of right"; the orders that can be made in pursuance of the rule are, (1) an order directing a pleading to be struck out, (2) an order directing the suit to be stayed, or dismissed, or directing judgment to be entered. Here the application was refused: the appellants could appeal against the final decision of the suit, see Civ. Proc. Ord. section 76. An order made under $R. S. C.$ (Eng.) O. $25$ r. 4 is not appealable without leave.

Saville, for the appellants.--An order dismissing an application under O. 6 r. 29 is made "in pursuance of" that rule just as much as one granting the application. The rule was intended for the exclusion of irrelevant matter.

RULING.—This is an interesting point. In my opinion the words "in puruance of" in O. 6 r. 29 should not be strictly construed as meaning only orders granting the relief which by the rule the Court is empowered to grant, and not also orders refusing to grant that relief. In my view "in pursuance of" in this rule is equivalent to "under" in O. 40 r. 1 (1) (d), (g), (n), (q), where an appeal would lie from an order granting or refusing an application. I am therefore of opinion that this objection fails.

Savile, for the appellants.—The Ordinance (Ord. 55/30) imposes on the transferee a liability not limited to the value of the property transferred: that liability can only be enforced by action against him. The proviso to the section contemplates "proceedings" against the transferee. Where a statute creates a liability. but does not prescribe a remedy, the remedy is by action: Ballance v. Falle (53 L. J. Q. B. 459). (He referred to Partnership Ord, 1933, section 27 (1) and O. 19 r. 46 (1).)

Gautama, for the respondents.—Section 3 (1) does not mention an action. In the absence of notice the transfer can be ignored, it is void and the property remains the property of the transferor. Until notice is given the creditor knows nothing of the transferee.

JUDGMENT.—This case raises an interesting point under the Fraudulent Transfer of Businesses Ordinance, 1930. The respondent Feroz Din sued the respondent Hansraj for the amount due on two promissory notes, the case was filed on 16-9-35 and judgment was given in favour of Feroz Din on 24-8-35. On this judgment execution issued and certain moveable property was Thereupon the appellants gave notice of objection attached. under O. 19 r. 55 claiming that the property attached belonged not to Hansraj, but to the Elburgon Fuel Stores, to whom Hansraj had transferred his business in May 1935. Admittedly no notice of the transfer was published as required by Ordinance 55/30, and the learned Resident Magistrate held that in such a case the transferee of a business stood in the shoes of the transferor and that execution could be levied against his goods without a separate action against him by the original plaintiff. Against that decision the present appeal is taken.

The point appears not to have arisen before. Section 3 (1) of the Ordinance says that: -

"Whenever any buiness ... is transferred ... the transferee shall . . . become liable for all the liabilities incurred in the business by the transferor, unless due notice in accordance with this section shall have been given and shall have become complete at the date of the transfer."

The appellants say that the Ordinance imposes upon the transferee a personal liability not limited to the value of the assets of the business transferred to him but extending possibly to the whole of his property, and that such liability must be enforced by an action against the transferee, and may not be enforced by process of execution in an action to which he was not a party.

The respondent Feroz Din, the judgment creditor, argues that the effect of the Ordinance is that, in the absence of the required notice he can ignore the transfer, and he points out the difficulty in which the construction contended for by the appellants would involve him, for he may not know anything about the transfer until he has sued the transferor and attempts to execute a judgment against him (as in the present case), or until a notice is published. There seems to be a further difficulty, namely, if in the first set of circumstances, the costs of the proceedings taken against the transferor prove to be irrecoverable, can they be recovered in subsequent proceedings against the transferee?

In my opinion the contention of the appellants is correct. Prima facie a liability must be determined by action, and I think the words of the proviso to section 3 $(2)$ upon which Mr. Saville has laid stress, show that this was what the Ordinance contemplates. The proviso runs:—

"Provided nevertheless that should proceedings be instituted against the transferee before such liability has ceased the said notice shall (for the purpose of such proceedings but for such purpose only) be deemed incomplete pending the final determination of such proceedings including all possible appeals, and pending the expiration of all periods during which such appeals may be brought".

Here, although the reference to "proceedings" might, if it stood alone, be interpreted as referring possibly to proceedings by way of execution, I am of opinion that the reference to "appeals" indicates that proceedings by way of the institution of a suit are intended.

I am, therefore, of opinion that the decision of the learned Resident Magistrate was wrong and should be reversed and the objection should be decided in favour of the appellants with costs in this Court and before the Resident Magistrate. The property of the appellants, which I hold to have been wrongly seized, must be restored to them, the costs of and incidental to the seizure being paid by the judgment creditor. The costs payable under the order of 21-11-35 by the appellants may be set off pro tanto against the costs hereby awarded against the judgment creditor.

$\overline{ }$