Krishna Kumar vs H.H. Maharaja Scindia

Dixit, J.—This appeal is directed against an order passed by the Additional District Judge of Gwalior appointing a receiver in a mortgage suit instituted by the Plaintiff-Respondent. The suit is on the basis of three mortgage deeds executed by Laxmi Kumar as manager of a joint Hindu family. The present Appellant is a minor son of laxmi Kumar, and both Laxmi Kumar and Krishna Kumar are Defendants in the suit.

One of the mortgages was executed on 29-3-1948 and the other two were executed on 13-4-1948.

The total sum secured by these three mortgage deeds is Rs. 5,25,000. The Plaintiff alleged that according to the terms of the mortgages, the mortgage amount was to be repaid within two years together with interest thereon at the rate of seven annas per cent. per month; that the mortgagor Laxmi Kumar stipulated to pay the Interest due quarterly and further agreed that in case of default in payment of interest as agreed, he would pay interest at the rate of seven annas per cent. per month on the arrears of interest.

After giving credit to the Defendant for a payment of Rs. 7,563-8-0, paid by him towards interest, the Plaintiff claims from the Defendants Rs. 5,54,697-15-6 together with interest ''pendente lite'' and future interest and has prayed for a decree for the realisation of this amount by the sale of the mortgaged property and also a personal decree for the balance in the event of the proceeds of the sale being found insufficient to pay the amount due to him. The Defendant Laxmi Kumar has admitted the execution of the mortgage deeds.

In his written statement he has contested the suit mainly on the grounds that the suit as framed is not maintainable; that the Additional District Judge, Gwalior has no jurisdiction to try the suit; that there was no consideration for the mortgage deeds; that they were executed when he was in an infirm state of mind; and that the rate of interest is excessive and that there was no legal necessity to support the debt.

The Defendant Krishna Kumar has, besides taking similar pleas, taken the additional plea that the alleged mortgages were usufructuary mortgages and that, therefore, the Plaintiff was not entitled to file any suit for the sale of the mortgaged properties. It must be noted that the objection of the Defendants that the lower Court had no jurisdiction to try the suit has been overruled and the decision of the trial Court overruling the objection was upheld by this Court in Civil Revision No. 157, of 1950 (MB) (A).

The suit was filed on 26-4-1950. On 7-5-1953 the Plaintiff applied for the appointment of a receiver. He sought the appointment of a receiver on the grounds that the total amount due from the Defendants on the date of the suit was Rs. 5,54,697-15-6; that since then a further amount of Rs. 8,578 by way of interest had become due and the amount of interest was accumulating every month at the rate of Rs. 2,456-13-0; that the Defendants were, protracting the litigation; that the value of the mortgaged properly had gone down considerably and that the Defendants had stopped taking care of the mortgaged property which consisted of houses, oil, sugar and ''dal mills'' and land, and that the mortgaged property was, therefore, deteriorating and further that the Defendants were realising rents from certain tenants of the mortgaged property but were not paying any amount to the Plaintiff either towards the principal or the interest.

On 21-12-1954 the lower Court made an interim order of the appointment of a receiver. Thereafter the evidence led by the parties on the market value of the mortgaged property, its condition and management was recorded and after considering the evidence and hearing the objections of the Defendants the trial Judge confirmed on 8-8-1955 his previous order of 21-12-1954 appointing receiver in the suit.

In this appeal Mr. Bhagwandas Gupta urges that no receiver can be appointed in a simple mortgage suit and that in the circumstances of the case it was neither just or convenient to appoint a receiver. In my view there is no substance in this appeal and it must be rejected. The question whether in a suit brought on the basis of a simple mortgage, the Court is competent to appoint a receiver of the mortgaged property, has been dealt with in two Division Bench decisions of this Court. and it has been held in these cases that in such a suit a receiver can be appointed.

These cases are - Rajah of Vizianagaram Vs. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, and - ''Bachhraj v. Ramprasad'' AIR 1955 Mad 40 (C). In the former case it was contended on the authority of - Anandi Lal and Others Vs. Ram Sarup and Others, that the words "any person" used in Sub-rule 2 of Order 40, Rule 1 were wide enough to include both parties and non-parties and that, therefore, in a suit based upon a simple mortgage, no receiver could be appointed as the mortgagor was entitled to remain in possession until sale. The Division Bench considered the provisions of Order 40, Rule 1, Sub-rule 1 and 2, repelled the contention and expressed its dissent from the view taken by the Allahabad High Court in Anandi Lal and Others Vs. Ram Sarup and Others, and made the following observation:

Sub-rule 2 is thus by way of an exception, and has the effect of limiting the operation of the main provision in Sub-rule 1. Sub-rule 2 cannot he construed so as to totally destroy the power given to the Court under Sub-rule 1. It is obvious that if Sub-rule 2 of Order 41, Rule 1 is construed as affording protection also to persons who are parties to the suit, the power of the Court to appoint a receiver would then be confined to the very rare cases whore the property is ''in media''.

Such a construction would have the effect of almost nullifying Clause (b), Sub-rule 1. of Order 40, Rule 1 and cannot be accepted. Again from the language itself of Sub-rule 2, it follows that the rule takes away the power of the Court to remove from possession a person other than a party to the suit. This Sub-rule speaks of the removal.

From the possession or custody of property any person whom any party to the suit has not a present right so to remove.

The words ''any person'' have been used in contradistinction to the words ''any party to the suit'' and thus a distinction is made between a person who is a party to the suit and a person who is not a party to the, suit. The words mean that the person in possession cannot be removed whom none of the parties to the suit have a present right to remove. I am fortified in the view I am taking of Sub-rule 2 of Rule 1 of Order 40 by numerous decisions of various High Courts.

A reference may be made to - AIR 1942 1 (Nagpur) - Damodar Moreshwar Phadke Vs. Radhabai Damodar Ranade, ; - Banwari Lal Sahu Vs. Baldeo Sah and Others, ; - ''Gobind Singh v. Punjab National Bank Ltd.'' AIR 1935 Lah 17 (H); - Vythilinga Pandarasannadhi, Trustee Kattalai, Kamalalayam South Bank Vs. The Board of Control, Sri Thiagarajaswami Devasthanam, ; - ''Ma Hnin Yeik v. K.A.R.K. Chettyar Firm'' AIR 1939 Rang 321 (J) and - ''Satgur Prasad v. Harkishandas'' AIR 1945 Oudh 25 (K).

"The Allahabad High Court, no doubt, took a different view in Anandi Lal and Others Vs. Ram Sarup and Others, , but that view does not appear to me to be in consonance with the language used in Order 40, Rule 1, The decision of the Allahabad High Court has been dissented from by other High Courts. A later Full Bench case - Mt. Tulsha Devi Vs. Shah Chironju Lal and Others, , doubted the correctness of the decision in Anandi Lal and Others Vs. Ram Sarup and Others, and recommended an amendment of Sub-rule 2 of Order 40, Rule 1. The Sub-rule has now been amended in Allahabad so as to make it clear that a party to the suit is not included in the words "any person".

(3a) It was further pointed out in ''Vishwanath''s case (B)'' that Order 40, Rule 1 confers a discretion on the Court in the matter of the appointment of a receiver and the only restriction on this discretionary power of the Court is that put by the words "just and convenient", that these words should be construed as meaning that "it is practicable and the interests of justice require it"; that the question whether it is just and convenient in a mortgage suit to appoint a receiver must necessarily be determined with duo regard to the rights of the parties under the mortgage transaction and the circumstances of the case and that in determining the question if must be borne in mind that the appointment of a receiver is essentially on equitable grounds and the object of equity in appointing a receiver to take charge of a mortgaged property, is to protect, the security.

The Division Bench also considered the question whether the fact of the interest being in arrears by itself could be sufficient for the appointment of a receiver. On this point the Division Bench did not express any concluded opinion but alter referring to - ''Ally Ramzan Yezdi v. Balthazar and Son Ltd.'' AIR 1936 Rang 290 (M); AIR 1939 Rang 321 (J) and Damodar Moreshwar Phadke Vs. Radhabai Damodar Ranade, did indicate that the fact that interest on a mortgage debt is in arrear is certainly one of the factors in deciding whether a receiver should be appointed. In ''Vishwanath''s case (B)'' the Division Bench upheld an order of the Additional District Judge, Indore appointing a receiver on the ground that on the terms of the mortgage deed the mortgagees were entitled to retain possession until the payment of the mortgage money and were also entitled to have the rents paid towards the satisfaction of the interest and that the mortgagors after taking the-property on rent as tenant had omitted to realise the rents from the sub-tenants and had also omitted to pay to the mortgagees such rents which they had realised.

In AIR 1955 Mad 40 (C) also it was held that in a simple mortgage suit the Court has jurisdiction to appoint a receiver; that the Court can appoint a receiver whenever it appears to the Court to be just and convenient to do so; that the fact that interest on the mortgage debt is in arrear can only be a factor in deciding whether a receiver could be appointed as also the fact that security is likely for any reason to become insufficient and that the discretion vested in the Court in the matter of the appointment of a receiver will be interfered with by this Court only if the discretion, has not been exercised in accordance with the principles on which judicial discretion must be exercised.

In ''Bachhraj''s case (C)'' the trial Court had in a simple mortgage suit, appointed a receiver of a part of the mortgaged property and the question was whether the remaining mortgaged property which had been sold and put in possession of the purchaser should also be placed in the charge of the receiver. The trial Court refused to appoint a receiver of the part of the mortgaged property sold and put in possession of the purchaser and this order of the trial Court was upheld by the Division Bench on the ground that the right to possession of that portion had passed to the purchaser of the equity of redemption and was not in the mortgagor on the date of the suit and the mortgagee''s interest had been sufficiently safeguarded by the appointment of a receiver in respect of unsold mortgaged property.

Mr. Bhagwandas Gupta learned Counsel for the Appellant did not say anything to raise in our minds any doubt as to the correctness of the decision in the cases of ''Viswanath (B)'' and ''Bachhraj (C)''. He, however, sought to distinguish these cases by saying that in ''Vishwanath''s case (B) the suit was on the basis of a usufructuary mortgage and that in Bachhraj''s Case (C) the question ''was of the appointment of a receiver of a part of the mortgaged property. In my opinion the distinction drawn by the learned Counsel does not in any way affect the rule laid down in those cases that in a simple mortgage suit the Court is competent to appoint a receiver of the mortgaged property.

The facts in ''Vishwanath''s case (B)'' do not limit the appointment of a receiver only to those cases where a mortgagee is entitled to possession of the mortgaged property. In ''Bachhraj''s case (C)'', the suit was a simple mortgage suit and there was no question of the mortgagee being in possession under the terms of the mortgage deed. It cannot, therefore, be maintained that the two cases referred to above are authorities only for the proposition that hi a suit on the basis of usufructuary mortgage a receiver can ho appointed. Those cases distinctly lay down that a receiver can be appointed in a simple mortgage suit and following those decisions the contention advanced by Mr. Bhagwandas Gupta that the lower Court had no jurisdiction to appoint a receiver here must be rejected.

As to the question whether the trial Judge exercised his discretion property in appointing receivers in the instant case, no ground for interference with the discretion exercised by the lower Court has been shown. That under the mortgage deeds a considerable amount is due to the Plaintiff is not denied by the Defendants. It is also not disputed that with the exception of the amount of Rs. 27,563-3-0 said to have been paid by the Defendants towards interest, no interest at all has been paid to the Plaintiff though nearly eight years have now elapsed since the date of the mortgages.

On the evidence adduced by the parties the trial Judge has found that the present value of the mortgaged property is considerably less than what it was at the time of the mortgage and the security is not sufficient to pay the mortgage debt. He has also found on that evidence that the Defendants do not manage the mortgaged property properly; that the property is not kept in proper repairs and management and that the Defendants are allowing the property to deteriorate.

Having regard to these considerations, I do not think it can be urged that it is not just and convenient to appoint a receiver of the mortgaged property. The Defendants'' pleas that the mortgages were executed by Laxmi Kumar when he was not in a proper state of mind and that the money was not borrowed for any legal necessity are pleas which are wholly irrelevant to the question of the appointment of a receiver.

There is thus no substance in this appeal and it must, in my opinion, be dismissed. I would not have dealt with this case at length if the learned Additional District Judge had instead of considering the decisions of the Allahabad High Court cited before him on the construction of Order 41, Rule 1(2), concentrated his attention on the reported decisions of this Court, namely, Rajah of Vizianagaram Vs. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, : AIR 1955 Mad 40(C). He no doubt made a casual reference to a Division Bench decision in - ''Bhawaniram v. Mohammed Hussain'' (S) AIR 1955 Mad 199 -(N), which followed Rajah of Vizianagaram Vs. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam,

On a reference to the case of ''Vishwanath (B)'' and ''Bachhraj (C)'', the learned Additional District Judge would have noticed that these cases really conc(sic)ded the question whether a receiver can be appointed in a simple mortgage suit. In this connection I cannot refrain, from saying that the growing tendency on the part of the subordinate Courts as well as of the lawyers to take recourse to the decisions of other High Courts in matters covered by decisions of this Court cannot but be deprecated. It is perhaps not fully realised, here that other High Courts regard it as a flagrant act of discourisay if subordinate Courts or lawyers ignoring a decision of their High Court, prefer or commend for acceptance a contrary decision of Anr. High Court. I hope I will have no occasion to repeat these observations.

For the above reasons I would dismiss this appeal.

Khan, J.

Having regard to the general policy governing tire appointment of a receiver and the peculiar circumstances of this case, the appointment of a receiver is necessary for the ends of justice. In the case of conflict of judicial opinion, I would like to follow that view which tends to further the course of justice and which prevents the abuse of the process of the Court.

With great respect to the learned Judges, the interpretation of Order 41, Rule 1(2), CPC in Anandi Lal and Others Vs. Ram Sarup and Others, , is somewhat narrow both in regard to Order 40, Code of Civil Procedure, and, also in regard to the incidents of a mortgage. The rights of a mortgagee even in a simple mortgage do not extend only to the bringing of a suit for the sale of the property (this is more in the nature of a remedy to realise the money) but the mortgagee has also the right to see that his security is not impaired and that the mortgagor does not commit waste. See Section 66, Transfer of Property Act.

The law of mortgages has its foundation in the desire of the creditor to secure himself against the loss of money and to that end he should be allowed to take all necessary steps. The mortgaged property is a security and I venture to suggest that the correct juristic conception about it is that subject to the right of redemption possessed by the mortgagor, the mortgagee is an inchoate owner.

By way of analogy, it may be pointed out that in the case of some mortgages, where the sale of the mortgaged property is allowed without the intervention of the Court, according to Section 69A, Transfer of Property Act, it is permissible to approach the Court in some instances for the appointment of a receiver. Now if in a case where the property is being sold without the intervention of the Court, a receiver can be legally appointed, then to hold that after the institution of a suit for the sale of property the Court cannot appoint a receiver, would be very queer indeed.

I adopt the view that even in cases of a simple mortgage, in a fit case, the Court can order the appointment of a receiver under Order 40, Rule 1, CPC and that Rule 2 does not operate as a bar.

I agree with my learned brother that the order of the trial Court docs not warrant an interference and that the appeal should be dismissed.