Amar Nath Gupta vs Om Prakash Verma and another

B. L. Yadav, J.—This is a defendant''s First Appeal from Order challenging the order dated 11101991 passed by the Civil Judge, Hardoi, appointing Sri Ajai Kumar Dwivedi, Advocate as a Receiver, under Order 40(1)(c)of the Code of Civil Procedure, 1918 (for short the Code).

The factual matrix of the case is that the plaintiffrespondent No. 1 had filed a suit for permanent injunction directing the defendantappellant not to interfere in the possession of the plaintiffrespondent No. 1 over the suit property on the allegations that the defendant appellant was neither a partner nor has got any right nor he has in ested any amount. It was a fact that the plaintiffrespondent No. 1 had obtained the land from his brother Bramha Prakash and installed a diesel pump over the land. He also constructed a showroom and invested certain amount for purchasing furniture. Plaintiffrespondent had advanced Rs. 40,000/ as a partner and not as a loan on the pronote or on any agreement and an agreement was entertd into on 2471987 A suit for the cancellation of the tenancy has been filed by Bramha Prakash, the brother of the plaintiffrespondent No. land the same is pending. The plaintiff had also given a notice dated 2361990. The plaintiff was in fact a partner in the diesel pump business. An application for temporary injunction was filed by the plaintiffrespondent No. 1 and on that appli�cation status quo was ordered to be maintained by order dated 26111990. Another application (49 Ga) was moved by the plaintiffrespondent No. 1 for appointment of a Receiver so that the property including ''Pali Vikas Centre'' and the diesel pump business may not be dissipated and that the suit property be not wasted by the defendantappellant and the plaintiff''s right in the said diesel pump business and ''Pali Vikas Centre'' be kept safe till the disposal of the suit or in any case till the plaintiffrespondent is paid back the amount along with the interest advanced by him. After considering the prima facie case and taking the appointment of the receiver just and convenient the learned Civil Judge has passed the impugned order appointing Sri Ajai Kumar Dwivedi, Advocate as the Receiver directing him to maintain the accounts of the firm and to furnish it before the court after every two weeks and to supervise the property in dispute, and maintain the accounts. Against this order the present appeal has been filed.

In this case both parties agree that the appeal itself be decided on merits. Consequently we proceed to decide the appeal on merits.

Sri S. P. Shukla, learned counsel for the appellant urged that there was no justification for the impugned order appointing a receiver as there was no prima case made out and at the same time the relief of appointment of the receiver is under the circumstances of the case equivalent to the final relief obtainable at the time the suit was disposed of on merits. At the same time the appointment of the receiver being a discretionary relief need not be granted as a matter of right, rather the order must be passed with great caution and circumspection The order for appointment of receiver must bt only with a view to preserve the property against an imminent danger of loss or diminution in value. As the partnership deed was not registered hence the suit itself was not maintainable in view of Section 69 of the Indian Partnership Act, 1932 (for short the Act). Reliance was placed on SB Industries and another v. United Bank of India and others AIR 1978 Allahabad 189.

Sri H. S. Sahai, learned counsel for the plaintiff respondent No 1 on the other hand refuted the submissions of the learned counsel for the appellant and urged that as the trial court has considered appointment of the receiver to be just and convenient under the circumstances of the cafe, and in the correct exercise of the discretion a receiver has been appointed All the relevant facts have been taken into account before passing the impugned order. The point about the nonmaintainability of the suit was decided as a preliminary point and it was held to be maintainable. Against that order a revision was also filed in this Court and the same has been dismissed. Consequently there appears no merit in the appeal and the appellant is entitled to no relief.

6 Having scrutinized the submissions of the learned counsel for the parties the points for our determination are as to whether the order of appointment of the receiver has been passed consistent with the provisions under Order 40 Rule 1 of tfee Code ?; whether a relevant finding in respect of the prima facie case has been recorded ? ; whether the trial court was satisfied that in order to protect and preserve the property against imminent "danger an order of appointment of the receiver was a must ? ; whether the discretion has been correctly exercised and whether the suit itself was maintainable ?

It would not be out of place to mention that in our country we have got great heritage pertaining to the Indian Jurisprudence and almost on all branches of law the principles were codified. To be brief, even the principles for the appointment of the receiver were traceable in Sanskrit language thousand years ago and in ''Katyayan Smriti'' the following ''Shlok'' is worthmention :

The aforesaid ''Shlok'' means that where the plaintiff has seized the property of the defendant who in other words was trying to damage the property of the defendant the Court or the King should not proceed to decide the dispute till the property was given back to the possession of the person or in any case Court may also appoint a totally outside person to supervise the property so that the same may remain safe till the final disposal of the matter.

In this view of the matter the principles For the appointment of the receiver were also pointed out in the aforesaid citation from ''Katyayan Smriti.

As regards the first point, suffice it to say that we have perused the impugned order in presence of the learned counsel for the parties and we have also been taken through the relevant documentary and other evidence available on record. The agreement between the parties in the form of partnership deed (paper No. 9Ka/1) had been filed by the plaintiff. It contains the conditions of the partnership even though those conditions have been denied by the defendantappellant and a receipt of a sum of Rs, 40,000/ from the plaintiff for the purposes of investing the same in ''Pali Vikas Centre'' has also been filed. The case of the defendantappellant was that the said amount was taken as a loan only and the plaintiff had nothing to do with the partnership business, but after persuing the impugned order and the relevant evidence available on the record in our opinion the trial court was prima facie satisfied that the plaintiffrespondent had advanced a sum of Rs 40,000/ in connection with the diesel pump business in''Pali Vikas Centre''. Consequently the plaintiffrespondent No. 1 has prima facie title in the property in suit. The trial court has also taken into account as to whether there was any imminent danger to the property in suit and was it necessary in order to save the property from destruction or wastage to appoint the receiver. The discussion has been made by the trial court in paragraph7 of the impugned order. The trial court has arrived at the conclusion that unless receiver was appointed there was an imminent danger of the loss and wastage of the property.

SB. Industries and another v. United Bank of India and others AIR 1978 Allahabad 189 was the case rendered by the Division Bench of this Court pointing out principles on the basis of which an order for appointment of the receiver mutt be passed. It has been pointed out that before appointing the receiver the court must be satisfied about plaintiff''s prima facie case. In other words, there must be reasonable possibility that the plaintiff will ultimately succeed in obtaining relief claimed in the suit. The appointment of the receiver must not be as a general rule, rather it was discretionary relief and the order must be passed with great caution and circumspection and only after being satisfied that the property was in the danger of being wasted or destroyed. These principles have been kept in mind by the trial court in passing the impugned order.

Kerr in his admirable treatise ''Receiver'' 14th Edition page 35 has stated as follows :

"......Where a plaintiff has a right to be paid out of a particular fund, the court will appoint a receiver in order to prevent that fund from being dissipated so as not to defeat his rights. The appointment of a receiver being such a case not by way of equitable execution, but analogous to it".

As regards the judicial discretion to be exercised by the court in passing an order for appointment of the receiver, it is worth mention that Word "discretion'' to has been derived from word "discretio'' which means a sign of understanding to discern between falsity and truth, between right and wrong, between shadows and substances, between empty and colour�able glasses and not to do according to whims and private affection (see AIR 1985 SC 722 West Bengal State Electricity Board and others v. Desh Bandhu Ghosh and others, and AIR 1985 SC 119 State of Maha�rashtra v. Mrs. Kamal Sukumar Durgule and others). In other words, discretion means a sound discretion guided by law.

No doubt a court of appeal has jurisdiction to ascertain as to whether the discretion of the trial judge has correctly been exercised, but that discretion would not normally be questioned unless the appellate court is satisfied that the same was wrongly exercised and such exercise of discretion has created an injustice to the other side (See Ormerod v. Todmordon (1882) 2 QBD 664 approved in Cherles Osenton & Co. v. Johnson (1942) AC 130. Gardner v. Jay (1885)29 Ch D 50).

Lord Diplock in Cookson v. Knowks (1979) AC 556 relied upon the observations in Smith v. Middleton (1972) AC 30 and made observaations that discretion vested in the trial judge by State or at Common Law must be exercised judicially and not arbitrarily or idiosyncratically for otherwise rights of parties to litigation would become dependent on judicial whim.

In Subhash Chand Jain v. Hari Singh (AIR 1987 SC 1148) it was pointed out by the Lordship of the apex Court that in the matters pertaining to the dissolution of partnership and accounts, in case the court was prima facie satisfied that the discretion has been correctly exercised, in that event the appellate court would not be justified in interfering with such an order appointing the receiver. The dictum laid down in this case applies on all fours to the present appeal and as the trial court has taken all precautions to exercise the judicial discretion, consequently this Court would not be justified in making interference.

A perusal of the aforesaid dictum pointed out in the aforesaid cases would indicate that in the present appeal the learned Civil Judge has taken all precautions to exercise his judicial discretion in a judicial way and not at his whims nor can it be said that he has exercised the jurisdiction arbitrarily. After perusal of the impugned order we are satis�fied that after being satisfied about the prima facie case of the plaintiffrespondent No. 1 and after recording a finding that in case the receiver was not appointed there was danger of the property in suit being wasted and after taking all precautions and circumspection that the impugned order has been passed.

Coming to the point about the maintainability of the suit, suffice it to say that the point was taken as a preliminary point and was decided by the trial court and against that order a revision was filed in this Court and the said revision was dismissed. Thereafter that order was not agitated any further. Consequently that chapter is closed and in the present appeal it is not open to the learned counsel for the appellant to urge that the suit was not maintainable.

In view of the premises aforesaid in our opinion the submissions of the learned counsel for the appellant have no substance and there is no justification for interference in the impugned order appointing receiver. Consequently the appeal fails and the same is dismissed. The interim stay dated 18101991 is vacated. (Appeal dismissed.)