Nilkantha Narayan Singh vs M.S. Zoha, Official Receiver and Another

Harries, C.J.—These two connected miscellaneous appeals and revisions arise out of the same matter, and the two revision applications have been filed in the event of it being held that no appeal lies from the order in question. The appeals are preferred by the decree-holder from an order of the learned Additional District Judge of Purulia sotting aside a sale which had taken place in execution of a decree which the decree-holder held against the judgment-debtor-respondent.

The facts giving rise to these proceedings can be shortly stated as follows: The judgment-debtor was one W.C. Banerji who was the lessee of a certain colliery known as the Bilbera colliery. The decree-holder was the lessor of the colliery in question. On 21st September 1938, the decree-holder filed a Huit against the judgment-debtor for arrears of royalty, and, in due course, he obtained a decree for those arrears which were made a charge on certain moveable and immovable properties in and around the colliery. On 15th December 1939, an application for execution was made and for sale of the properties charged. On 16th March 1940, the properties were put up for sale and purchased by the decree-holder. On 15th April 1940, objections were filed separately by the judgment-debtor and by the Official Receiver of the Calcutta High Court, and these objections appear to have been filed u/s 47 and Order 21, Rule 90, Civil P.C. It appears that in a suit on the original side of the Calcutta High Court in which the judgment-debtor was the defendant, the Calcutta High Court had appointed the Official Receiver of that Court a receiver of W.C. Banerji''s property--hence his objection to the present sale. The Official Receiver alleged that he was a necessary party and that he had received no notice of the execution proceedings or of the pro-posed sale. It was further alleged on behalf of the objectors that there had been material irregularities in the publication and conduct of the sale which had resulted in the property being sold at a grossly inadequate price.

The learned Subordinate Judge who heard these objections at first instance held that they were without substance and rejected them. He came to the conclusion that the Official Receiver as receiver of the estate of the judgment-debtor was not a necessary party and that no notice was required to be served on him. He further held that there were no irregularities and the property had not been sold for an inadequate price. On appeal, however, the learned District Judge reversed the decision of the trial Court. He appears to have held that the Official Receiver, as receiver of the estate of the judgment-debtor, was entitled to notice and that the failure to serve notice on him amounted to a material irregularity and that such had caused injury to the judgment-debtor by reason of the fact that the property had been sold at a grossly inadequate price.

He, therefore reversed the decision of the Subordinate Judge and set aside the sale. The learned District Judge undoubtedly treated the applications as applications under Order 21, Rule 90, though a somewhat different view had been taken by the learned Subordinate Judge. If the applications came within Section 47, Civil P.C., a second appeal would lie. But, on the other hand, if they were applications under Order 21, Rule 90 of the Code, no second appeal would lie to this Court. The matter, however, is of academic interest, because as I have said the decree-holder has filed two petitions in revision in the alternative.

It has been argued by Dr. Dwarka Nath Mitter on behalf of the decree, holder that the Official Receiver was not a necessary party in these proceedings and that the decree-holder was not bound to serve him with notice. It is not now urged that notice under Order 21, Rule 22, Civil P.C., was required to be served on the Official Receiver, because it is clear from the wording of that rule that the Official Receiver would not come within its terms. What is said, however, is that the Official Receiver being in possession of the judgment-debtor''s property the decree-holder could not proceed to sell this property without notice to the Official Receiver and without leave of the Calcutta High Court who appointed him. Dr. Dwarka Nath Mitter has urged that the mere appointment of the Official Receiver as receiver of the judgment-debtor''s estate would not transfer the possession of this colliery and the moveables throughout to the Official Receiver.

On the other hand, it has been argued by the respondent that the moment the Official Receiver was appointed he was the person in possession of this colliery, and therefore notice to him of the execution of the proposed sale was essential. The actual order appointing the Official Receiver, receiver of the judgment-debtor''s estate was made by Ameer Ali J., and in it the judgment-debtor is ordered quietly to deliver possession to the receiver and the receiver is ordered to take possession of the property which is described in a schedule. One of the items is the colliery now in question.

On behalf of the appellant, it is said that this order merely gives the receiver a right to take possession, but it does not actually put him in possession. It must be remembered that this order was made by the High Court at Calcutta, whereas the property in question is situate in Bihar. The question therefore arises whether the Official Receiver can be said to be in possession of this colliery in Bihar the moment the order has been made. On behalf of the appellant great reliance is placed upon a Bench decision of the Calcutta High Court: Kanailal Jalan Vs. Manoo Bibi and Others, . The head note of that case is as follows:

The rule that the possession of a receiver may not be disturbed without leave does riot apply, so far as third persons are concerned, until a receiver has, been actually appointed and is in possession. It is not enough that an order has been made directing the appointment of a receiver. Until the appointment has been perfected and the receiver is actually in possession, a creditor is not debarred from proceeding to execution.

The headnote correctly sets out the view of Sir Asutosh Mookerjee who was the Judge who delivered judgment in the case. The case makes it clear that the appointment of a receiver in Bengal does not affect third persons in Bengal until the receiver has actually taken possession. It appears that the same rule would apply, and possibly with greater force, where the property concerned is not within the jurisdiction of the Court which appointed the receiver. The view expressed in Kanailal Jalan Vs. Manoo Bibi and Others, was followed recently in Lakshminarain Khetry v. Amar Nath Khetry ILR (1937) 2 Cal. 440, in which McNair J. held that the appointment of a receiver does not affect the right of a creditor to proceed to execute a decree by attachment of the property intended to be received until and un-less the appointment of the receiver has been perfected and he is actually in possession. This doctrine is not restricted to immovable properties only, and is equally applicable to cases where the receiver has only a debt to receive.

In these cases the learned Judges have purported to follow earlier English cases and I shall only refer to one of them--Defries v. Creed (1865) 34 L.J. Ch. 607 In that case an action was brought against a partnership firm and judgment recovered after a suit had been instituted for dissolution of the partnership and the appointment of a receiver. Before the receiver was actually appointed, but after he had been nominated, execution was levied upon the judgment, under which the sheriff took possession of certain partnership property, and refused to give up possession thereof after the appointment of the receiver. Upon motion to commit the sheriff for contempt of Court, Kindersley, V.C., held that there was no contempt. He enunciated the principle in these words:

The rule is this: that where the Court has taken possession of property by its receiver, it defends that possession and acts with a high hand, and with an assertion of authority somewhat strong and severe, and proceeds upon this footing: If any one, be he who he may, disturbs the possession of the receiver, it holds that person as guilty of a contempt of Court, and liable to be imprisoned for that contempt, upon the principle that the officer of the Court, being in possession, that possession is disturbed without the leave of the Court. Now, the question is, whether what has been done here is a disturbance of the possession of the receiver appointed by the Court? How can there be a disturbance when the receiver was not in possession? And I cannot see how it is possible to apply that principle where there has been no disturbance of possession, that is, where the Court has merely directed that a receiver shall be appointed; but he has not been actually appointed; and where, though the parties to the suit are not allowed to touch the property, the receiver has not been appointed, and the property is not in fact in possession of the Court. It is said however that the property must be considered as being in possession of the Court, because it has by decree restrained the parties from touching it; but is there any case in which, under such circumstances, the Court had treated the seizure by a creditor as a contempt of Court? The decree operates as between the parties to the suit, and does not affect outsiders.

In this case, the Vice-Chancellor held that there could be no contempt unless there had been a disturbance of the actual possession of the receiver. The possession must be the possession as a receiver. Merely the appointment of a receiver does not give him possession. On behalf of the respondent, it was strongly contended that by mere appointment possession at once passes to the receiver. It is true that when a receiver is appointed the actual appointment operates as an injunction restraining the parties to the suit from interfering with the property, but lit does not affect outsiders.

It was urged that under Order 40, Rule 1, C.P.C., the Court actually gives possession to the receiver. But in my view that is not so, and, in any event, I find it difficult to understand how a Court in Bengal could vest or transfer the possession of property in Bihar from A to B. It seems to me that a receiver appointed under Order 40, Rule 1, Civil P.C., is entitled to take possession, and in any event the order of Ameer Ali J. appointing this particular receiver certainly does not transfer the possession of anything to him but merely entitled him to take possession. Great stress was laid upon certain observations of Lord Watson in Peruvian Guano Co. Ltd. v. Dreyfus Brothers & Co. 1892 A.C. 166. The passage relied upon is as follows:

The order of 17th December 1880 for the appointment of a receiver had the immediate effect of making the company bare custodians for the Court; and the appointment of 23rd February 1881 transferred the actual possession of the cargoes or their proceeds from the company to an officer of Court. In my opinion, detention by the company, whether it had been legal or illegal, ceased at the first of these dates.

In my view these observations have no application to the present ease. The receiver in that particular case was a receiver appointed in proceedings between the parties to the appeal, and, us I have said, the moment the receiver is appointed it binds the parties, but the question still has to be decided whether outsider are affected. In my judgment the mere appointment of the Official Receiver of the Calcutta High Court as a receiver of the judgment-debtor''s estate did not place him in possession of this colliery. Whether he was entitled to receive notice of these execution proceedings must depend upon whether he was in possession, land it is suggested on behalf of the respondent that he actually took possession before sale. The learned Additional District Judge at one part of his judgment appears to suggest that the receiver did take possession before the sale but later appears to hold that he took possession when he made an inventory in April 1940 which was clearly after the sale took place.

The only evidence which is before us is the evidence of one Rajen Chandra Mukharji, an assistant to the Official Receiver of the High Court at Calcutta. In examination-in-chief he stated that all the properties of the judgment-debtor including the Bilbera colliery vested in the Official Receiver by reason of the order of the High Court. I do not know what he meant by that; but if he meant that the title vested in the Official Receiver, then he was quite wrong. In cross-examination he mentions that the Official Receiver had taken possession of the colliery but could not state when he did so.

Further, he could not state how possession had been taken. That is the only evidence before us; but, we are not in a position to say if there was any other material before the learned Additional District Judge. There can be no doubt that in April 1940 the Official Receiver did send a representative to the colliery and made an inventory, and Dr. Dwarka Nath Mitter urges that it was then that he took possession for the first sime; but the learned District Judge does say that, in his opinion, the receiver was already in possession of the colliery when he made the inventory in question. He then goes on to say that the colliery, being an abandoned one, was property over which the receiver could not exercise any acts of possession and then says that making an inventory was a sufficient exercise of a right of possession in a case like the one before him. Having held that he was already in possession when the inventory was made, he then seems to suggest that making inventory was the receiver''s first act of possession. The finding is extremely vague, and it is impossible for us to say what it is and upon what it is based.

If the receiver did take possession before the sale, then notice should have gone to him, and the failure to give him notice would render the sale liable to be set aside. On the other hand, if the receiver did not take actual possession until he made the inventory in April 1940 then he was not in possession at the date of the sale, namely, 15th March 1940, and no notice was required to be sent to him. The decision of this case, therefore, must rest upon a finding as to when the Official Receiver of the High Court at Calcutta took actual possession of this colliery. As I have said, the finding, as it stands, is unsatisfactory and so vague that I cannot appreciate precisely what it is. This case must go back to the learned Additional District Judge to record a finding as to when the Official Receiver took possession. Having come to that finding, the case will then be disposed of in the light of the observations which I have made. The learned District Judge must reconsider this question, but he must not allow either of the parties to adduce any further evidence and the matter must be decided on the evidence already on the record.

The result, therefore, is that either in appeal or revision the order of the lower Court is set aside and the cases are remanded to the lower Court to be disposed of in accordance with law and in the light of the observations made in this judgment. The costs of these proceedings and of the proceedings in the Court below will abide the event and will be disposed of by the learned District Judge who hears these cases on remand.

Chatterji, J.

I agree.