[1946] EACA 30

## COURT OF APPEAL FOR EASTERN AFRICA

Before Sir Joseph Sheridan, C. J. (Kenya), Sir Norman Whitley, C. J. (Uganda), and SIR G. GRAHAM PAUL, C. J. (Tanganyika)

REX (per Official Receiver of the Uganda Protectorate); Respondent

## MANISHANKER V. MEHTA, Appellant

## Criminal Appeal No. 3 of 1946

(Appeal from decision of H. M. High Court of Uganda)

Bankruptcy offences—Trader disposing of property obtained on credit and not paid for otherwise than in the ordinary way of his trade—Uganda Bankruptcy Ordinance, Section 134 (1) (o)—"The ordinary way of his trade"—Bankrupt attempting to account for property by fictitious loss—id. S. 134 (I) (1) -Making false entries in books of account-id. S. 134 (I) (j).

The Appellant, a trader, was convicted of the following offences against the Bankruptcy Ordinance and sentenced to imprisonment:—

- 1. Disposing of property obtained on credit and not paid for otherwise than in the ordinary way of his trade contrary to S. 134 (I) $(o)$ . - 2. Attempting to account for part of his property by a fictitious loss, contrary to S. 134 ( $\hat{I}$ ) (1).

3. Making false entries in his books of account, contrary to S. 134 (I) (i). He appealed.

Held $(19-2-46)$ .—(1) That the ordinary course of trading in piece goods is a highly technical matter on which the opinion of experts was properly admissible.

(2) The words "in the ordinary way of his trade" mean the ordinary way in which<br>reputable traders conduct that trade and not according to the standard which an accused person has arbitrarily set up for himself.

(3) That the onus of proving the fictitious loss is on the prosecution.

(4) That as regards the third count the evidence established that the entries though false, were not made by the bankrupt with the intention to conceal the state of his affairs.

Appeal dismissed as regards Counts 1 and 2 but allowed as regards Count 3. Case referred to: R. v. Valabhji 17 K. L. R. 54.

Wilkinson for the Appellant.

Phillips, Crown Counsel (Kenya), for the Crown.

JUDGMENT (delivered by SIR G. GRAHAM PAUL, C. J.)—The Appellant was convicted in the Magistrate's Court on three counts under the Bankruptcy Ordinance. The three counts were as follows:-

- "(1) That the said Manishanker Vejeshanker Mehta did within 12 months next before the presentation of a bankruptcy petition against him, namely between the 2nd day of September, 1944, and the 9th day of September, 1944, dispose of trade goods to the value of Sh. 130,448/24 which he had obtained on credit and not paid for and such disposing of was *not in the ordinary way* of his trade, contrary to Section 134 (I) (o) of the Bankruptcy Ordinance. - (2) That the said Manishanker Vejeshanker Mehta did after the presentation of the Bankruptcy Petition against him, namely in his Statement of Affairs dated the 6th day of November, 1944, his Preliminary Examina-

tion dated the 6th day of November, 1944, and his Public Examination concluded on the 24th day of February, 1945, attempt to account for Sh. 131,000 being part of his property by a fictitious loss, viz. an alleged burglary at his residential premises, House No. 3, Plot No. 15, Wilson Road, Kampala, contrary to Section 134 (I) (1) of the Bankruptcy Ordinance

(3) That the said Manishanker Vejeshanker Mehta did within 12 months<br>next before the presentation of a bankruptcy petition against him make the following entries in his books of account and such entries were $false:$

| Page | Date | | <b>Particulars</b> | Ledger | Folio | Amount | |------|----------------------|------|-------------------------------------------------------------------------|--------|--------|--------| | 484 | Sept. 6th | | Gordhandas Bhimji, Iganga. Cash Receipt<br>No. M 9. | 25 | 279.27 | 279.27 | | 484 | $\ddot{\phantom{0}}$ | 6th | Karsandas Kalyanji, Iganga. Cash Receipt<br>No. 10. | 40 | 602.21 | 602.21 | | 485 | $\mathbf{1}$ | 9th | Gordhandas Bhimji, Iganga.<br>Receipt No.<br>9 cancelled. | 25 | 279.27 | 279.27 | | 486 | $\ddot{\phantom{0}}$ | 15th | Karsandas Kalyanji, Iganga.<br>Refund of<br>money for Receipt No. M 10. | 40 | 602.21 | 602.21 |

Contrary to Section 134 (1) (*i*) of the Bankruptcy Ordinance"

He was sentenced as follows: -

On the first Count.—One year's imprisonment with hard labour.

On the second Count.—One year's imprisonment with hard labour.

On the third Count.—One month's imprisonment with hard labour to run concurrently with the sentence on the first Count.

From these convictions and sentences the appellant appealed to the High Court of Uganda, which dismissed the appeal against the convictions but altered the sentences to: $-$

First Count: 18 months' imprisonment with hard labour:

Second Count: 18 months' imprisonment with hard labour;

Third Count: 1 month's imprisonment with hard labour;

all to run concurrently.

From the judgment of the High Court the appellant has appealed to this Court.

In dealing with this appeal it is of course necessary to consider the three counts separately. The first count was under S. 134 (1) (o) of the Uganda Bankruptcy Ordinance which is in the following terms:—

"134. (1) Any person who has been adjudged bankrupt or in respect of whose estate a receiving order has been made shall in each of the following be guilty of an offence: $-$

(o) if, within twelve months next before the presentation of a bankruptcy petition by or against him, or in the case of a receiving order made under section 99 of this Ordinance, before the date of the order, or after the presentation of a bankruptcy petition and before the making of a receiving order, he pawns, pledges, or disposes of any property which he has obtained on credit and has not paid for, unless, in the case of a trader, such pawning, pledging or disposing is in the ordinary way of his trade, and unless in any case he proves that he had no intent to defraud."

The first point made by the appellant's Counsel was that the Magistrate had heard the evidence of two witnesses who were called as experts; that he had

based his judgment on the evidence of these two expert witnesses; and that the evidence of expert witnesses as to the matters involved in this case (ordinary course of trading in piece goods) was inadmissible. In this point there is no substance. Counsel sought to restrict the word "art" used in the Uganda Evidence Ordinance as one of the subjects on which expert evidence might be given, to the narrow meaning of "fine art" and submitted that it could not cover methods of trading. In our view such narrow interpretation is wrong and the Magistrate in our opinion was quite right to receive the evidence of experts on a very highly technical matter which could not be expected to be within the knowledge and experience of the Court.

The next point was as to the interpretation of S. 134 (1) (o) of the Bankruptcy Ordinance and particularly the words "in the ordinary course of his trade". The learned Magistrate held that these words in this case meant in the ordinary course of the wholesale piece goods trade which was the trade adopted by the accused as "his", "but not to the unbounded limit allowing him the benefit of how he thought that trade should be conducted by himself". In this we think that the learned Magistrate was correct. We think that it is obvious that the Legislature in using these words was setting up as the standard the ordinary way in which reputable traders conducted that trade, and not the standard which an accused person had arbitrarily set up for himself. It is to be noted that the section under which this charge is brought has the wording "in the ordinary way of his trade" and not "in his ordinary way of conducting his trade".

Any other interpretation of these words would in our opinion be absurd. The interpretation for which appellant's Counsel contended would mean that a bankrupt who before the bankruptcy petition had been conducting his trade<br>definitely on the lines of a "long firm" swindle could escape conviction of an offence under sub-section (o) because he had habitually been committing this very offence. That is clearly an absurd result. Furthermore, if the offence visualized by sub-section (o) were committed by a bankrupt in the course of *his* first transaction in the trade he adopted, there would be no standard whatever to apply if appellant's Counsel's interpretation were accepted.

It is not surprising that such a strenuous effort should have been made so to interpret sub-section $(o)$ as to make the appellant's own standard of trading the only criterion by which his trading was to be tested, for, measured by ordinary standards of commercial dealings, the appellant's course of trade could not be defended.

Upon this count the relevant dealings of the appellant were very carefully analysed at great length by the learned Magistrate in his judgment, and it is unnecessary to recapitulate these dealings in detail. It is enough to say that at a time when according to the evidence he was practically insolvent as a result of selling at a loss goods which he had obtained on credit, instead of explaining the position to his unpaid creditors, he proceeded to get further goods on credit, and these goods he did not attempt to use in the ordinary course of his trade. He simply passed them on as quickly as he could in the same bulk to get for them in cash the same amount as he owed in respect of the goods. He did not use the cash he obtained to pay off his creditors or any of them. He did not buy other goods with the cash. It does not appear on the evidence that there was any honest reason at all for his obtaining these goods on credit and turning them into cash as quickly as he could.

The learned Magistrate found on the evidence—and except for the question as to the interpretation of sub-section $(o)$ it was a finding of fact—that the accused's disposal of these goods acquired on credit was not in the ordinary course of his trade, and that he has not proved that he had no intent to defraud.

It may be noted here that it was decided in the case of R. v. Valabhji (17 K. L. R. 54) that either of these two findings was enough to constitute the offence. We agree with that decision. Even if, on this second appeal, we could competently interfere with these findings of the learned Magistrate we cannot discover on the evidence any reason for doing so. With reference to the actual grounds of appeal on this count we are unable to find that the learned Magistrate took into account evidence not relevant to this count and we have already deal with the evidence of the expert witnesses.

It is true that the High Court judgment, in summarizing matters on the first count went further than the evidence justified in saying that "In all cases he sold at a loss, for where the price appears the same he had allowed 5 per cent discount". It does not appear on the evidence that after 4th September he did make losses on his sales. It does appear that he got rid of the goods obtained on credit after that date as quickly as he could for the same amount of cash as he owed his creditors for them. In our opinion that error in the High Court judgment did not vitiate the conclusion of fact at which the High Court arrived on the whole subject of the first count.

As to the second count it is clear that the onus of proof lay upon the prosecution that the alleged burglary was fictitious and this was fully and expressly realized by the learned Magistrate who said: "I appreciate that the onus in this respect is very heavy on the prosecution". The question whether that onus was fully discharged was a question of fact upon the evidence and to that question the learned Magistrate devoted great care. He examined the evidence very closely and came to the conclusion that the prosecution had fully discharged the onus of proof. With that conclusion of fact we see no reason to interfere -even if we had jurisdiction to do so on a second appeal. We can find no substance in the ground of appeal dealing with this count as it is clear that at no point did the learned Magistrate misdirect himself as to the onus of proof or otherwise.

As to the third count, it is comparatively trivial as to amount, and in view of our conclusions on the other two counts and the concurrency of the sentence on the third count, it is of more academic than practical importance. We do consider however that the conviction on the third count was not proved, as it did appear on the evidence that the entries on the two sides of the account, though undoubtedly false, were made by the accused not with the intent to conceal the stae of his affairs, but with the purpose of persuading a particular purchaser to conclude a purchase.

For the reasons we have given the appeal is dismissed as regards the first and second counts. It is allowed as regards the third count, the conviction on which is quashed and a judgment of acquittal substituted.