N. SUBRAMANIA IYER vs THE OFFICIAL RECEIVER, QUILON

The Supreme Court held that in insolvency proceedings, the burden of proving that a transaction is not supported by good faith and valuable consideration lies with the Official Receiver, as per Section 35(iii) of the Travancore Regulation VIII of 1090. The court found that the lower courts erred by placing the onus on the transferee and incorrectly applied the principle of res judicata. The correct test for determining good faith is based on honesty as defined in Section 2(22) of the Indian General Clauses Act, not on due care and attention as per Section 2(6) of the Travancore and Cochin General Clauses Act. The appeal was allowed, and the orders of the lower courts were set aside.