Report No. 26
19. Burden of proof regarding voluntary transfers.-In the case of a voluntary transfer, the burden of proving lack of consideration and good faith lies on the Official Assignee1-6. In a Rangoon case under the Provincial Act, Page C.J., made the following observations7:-
"There is no doubt that the effect of the ruling of the Judicial Committee (in 1931 P.C. 75 and 3934 P.C. 3) to the effect that in a proceeding under section 53 (Provincial Act), the onus lies upon the applicant to prove that the transfer was not made "in favour of a purchaser or an encumbrancer in good faith and for valuable consideration" has placed the Receivers and creditors in insolvency in a great difficulty. In 99 cases out of 100 in which proceedings are taken under section 53 of the Act, the Receiver knows nothing of the transaction which is impeached and is called upon to prove the negative in connection with a matter of which he cannot be expected to have any personal knowledge.
I should have thought that in an application under section 53 of the Provincial Insolvency Act, it would have been the intention of the Legislature when once a transfer of property by the debtor is proved within two years of the presentation of the petition that the transferee should have been called upon to prove that he was a purchaser in good faith etc."
In another Rangoon case8 under section 55 of the Presidency Act, Page C.J. reiterated the same view. We have given careful consideration to these observations but we think that the burden of proof should not be shifted to the transferee. The period of two years during which a voluntary transfer may be impeached is a long period. During this period the insolvent must have entered into a large number of transactions many of which would be bona fide. It is only a few transactions that may be tainted with fraud. If the burden of proof is placed on the transferee, it will work great hardship on bona fide transferees for value.
Moreover, the normal rules relating to burden of proof are clearly laid down in Chapter VII of the Indian Evidence Act. Section 101 of that Act enacts that whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist. Section 102 enacts that the burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side. These are salutary rules, and should not be lightly changed. We, therefore, think that no sufficient grounds exist for changing the law9 in respect of burden of proof laid down in the Indian Evidence Act, 1872.
1. Official Receiver v. P.L.K.M.R.M. Chettyar Firm, AIR 1931 PC 75 (78) left-hand column: 58 IA 115 (Lord Atkin) (appeal from Rangoon under the Provincial Act).
2. Official Assignee v. Khoo Saw Cheow, AIR 1930 PC 265 (Appeal from Straits Settlements, Penang Lord Tomlin).
3. N. Subranzaniya Iyer v. Official Receiver, AIR 1958 SC 1: 1958 SCR 257.
4. Harry Pope v. Official Assignee, AIR 1934 PC 3: ILR 12 Rang 105: 60 Ind App 362 PC (decision under Presidency Act).
5. For previous law see Official Assignee v. Sheikh Moiddeen, AIR 1927 Mad 1013 (1014), right: ILR 50 Mad 948 (Presidency Act).
6. Mulla Law of Insolvency in India, (1958), pp. 613-614.
7. H. Hagemister v. U. Po Cho, AIR 1935 Rang 53: ILR 12 Rang 625 (Provincial Act).
8. U. Ohn Pe v. Fatima Bibi, AIR 1936 Rang 145 (146), left (Not reported in ILR).
9. See App I, clause 54.