Bankruptcy-Fraudulent preference-Claim for refund of, two sums of money
paid to a creditor within three months before date of petition for. bank-
ruptcy

A petition in bankruptcy was presented by creditors against Beshir
Terous, and an order of adjudication was made accordingly. The receiver in
Bankruptcy then brought an action against appellant for refund of two
sums of money paid to appellant by Beshir Terous on the ground that the
said sums were paid within three months before date of petition for bank-
ruptcy and that appellant had been given fraudulent preference' within the.
meaning of section 31 of the Bankruptcy Ordinance 1916.

Held: (i) that on the facts payment of the two sums of money made
by the debtor amounted to fraudulent preference of the creditor to whom
they were made.

(ii) that when a transaction is proved to be a. fraudulent· prefeunoe
under section 31, section 32 cannot apply because the words ~SQbject to the
foregoing provisions" mean "except as provided;".

QS\nkruptcy Ordinance 1916,88. 31, 32. Sudan Penal Code 1899,'8 •. 171.

Appeal

March 30, 1921. Peacock J.: This is an appeal from the judge-
ment of the judge of the High Court sitting in Bankruptcy.

~ Court: Dun C. J., Peacock and Williamson 11.

It will be convenient to, set out shortly- the facts of this case; they
are all important.

Beshir Terous was a unerchant owning two shops at .-0m4~
In June last year he was in a very bad financial position. He had many
bills due or about to fall due, which he was or would be unable to meet.'
He took advantage of the Bairam holiday, June 17-24, to leave Khar-.

. toum, unknown to his creditors, and' before his creditors discovered
that he had left, he bad crossed the Sudan Egyptian .frontier.

Up to the last day of Ramadan, Beshir Terous was carrying on ~
business as usual at Omdurman. On June 19 1:\ bill in favour of Con-
stantine Saba for £E.290 fell due. On June 20 another bill fell due
for £E.286. On June 21 an employee of Beshir Terous went to the
shop of Constantine Saba arid-paid a sum of £E.l00 to his Manager,
George Hilal. On June 22 the employee of Beshir' Terous received a
telegram from Beshir Terous saying that he had arrived in Cairo. on
June 24 the employee, on further instructions received by telegram
from Beshir Terous, paid Constantine Saba a sum of £E.277.

The following bills against Beshir Terous were in the hand of Con-
stantine Saba.

£E.231.945 m/ms.balance of bill due on June 20

        £E.256                                         due' on July 26

        £E.264.980                                   due on August 8

        £E.196,600                                   due on August 10

The following bills payable in June were. outstanding against
Beshir Terous.

To George Kahawati £E.49.57 m/ms due June

                     Nadim Gangi £E.206.250                 . due .June

                     Naaman Haddad £E.533.71'5               due June

                     George Sidawi £E.221.107                  due June

                     Elias Georgiflia £E.167.500                due June

                     Manoli Katsiginia £E.351.                   due June

On June 24 applications were made to the Governor, Khartoum,
for the arrest of Beshir Terous.

On June 29 a petition in bankruptcy. ~as presented by Constan~

         Saba and other creditors.                               .

. On August 8, 1920; an order, of adjudication was made .~
Beshir Terous.

On July.4 warrant for arrest of Beshir Terous was issued. This
was executed on July 22, 1920, in Cairo, and Beshir Terous was
brought back to the Sudan under arrest.

On November 13 the receiver in bankruptcy brought an action
against Constantine Saba for refund of the two sums of £E.100 paid on
June 21 and £E.277 paid on 24th June on the ground that these sums
were paid within three months before the date of petition for bank-
ruptcy, and that Constantine Saba had been given fraudulent preference
within the meaning of section 311 of the Bankruptcy Ordinance 1916.
Beshir Terous has been convicted of an offence under section 171 of
the Sudan Penal Code; of dishonestly or fraudulently removing property
or transferring property with intent to prevent such property from being
distributed among his creditors.

The court of first instance was satisfied that the payments to Con-
stantine Saba were made with a view of giving him preference and that'
such preference was a fraudulent preference within the meaning of
section 31 of the Bankruptcy Ordinance.

The bankrupt is a fraudulent bankrupt, and is serving a term of
imprisonment having been convicted of an offence under section 171
of the Sudan Penal Code.

The court has no doubt of the construction of section 32.2 It is
perfectly clear that the words "Subject to the foregoing provisions of the
Ordinance" etc. mean: except as provided, if the court -is satisfied that
the payment to Constantine Saba was a fraudulent preference within the
meaning of section 31 (I). The court is satisfied that the view of the
learned judge in the court below is the correct view and that section 32
does not apply.

Was the learned judge right in holding that the payment to Con-
stantine Saba constituted a fraudulent preference?

The cases on the interpretation of the words "with a view of giving
that creditor a fraudulent preference over other creditors" used in the
Bankruptcy Ordinance are numerous and difficulty has been experi-
enced by judges in applying the words used by the act to the facts of
particular cases.

1 Section 31 of the Bankruptcy Ordinance 1916 now corresponds to section
50 of the Bankruptcy Ordinance 1928.

• Section 32 of the Bankruptcy Ordinance 1916 now corresponds to section
51 of the Bankruptcy Ordinance 1928