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TMI Blog1961 (4) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... mills : (1) Hiralal Patni, the appellant, and Munni Lal Mehra........ 19/40th share; (2) Gambhirmal Pandiya Private Ltd.... 8/40th share; (3) Messrs. John Co... 11/40th share; and (4) I. E. John .... 2/40th share. Seth Loonkaran Sethiya, respondent No. 1, advanced large amounts to Messrs. John Co. on the security of its business assets and stocks. On April 18, 1949, the said Sethiya filed O.S. No. 76 of 1949 in the Court of the Civil Judge, Agra, against John Co. for the recovery of the amount due to him by sale of the assets of the said company. To that suit the partners of Messrs. John Co., for convenience described as defendants 1st set , and the partners of Messrs. Johns Jain Co., who were for convenience described as defendants 2nd set , were made parties. Pending the suit, the said Sethiya filed an application under O. XL, r. 1, Code of Civil Procedure, for the appointment of a Receiver. By an order dated May 21, 1949, the learned Civil Judge appointed two joint Receivers and directed them to run the three spinning mills. Hiralal Patni filed an appeal against that order to the High Court at Allahabad, and the said Court by its order dated August 22, 1949, modifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was for the Receiver to make a fresh arrangement of the future under the supervision and directions of the Civil Judge, Agra. On January 17, 1959, the Receiver applied to the Civil Judge for instructions whether he should proceed at once to dispossess the appellant. On notice, Hiralal Patni raised various objections and claimed that he was entitled to remain in possession of the property as its owner. The learned Civil Judge disallowed his objections and held that the Receiver derived his authority from the preliminary decree, and directed the Receiver to lease out the said flour mill by auction for a period of two years. Pursuant to that order, an auction was held, and the appellant was the highest bidder, and he paid the lease amount and executed a formal lease deed. Not satisfied with the order of the Civil Judge, Hiralal Patni preferred an appeal to the High Court. The High Court in an elaborate judgment considered the contentions raised on behalf of Hiralal Patni and dismissed the appeal. Hence the present appeal. 4. Learned counsel for the appellant raised before us the following three contentions, which the appellant unsuccessfully raised before the High Court as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er can or cannot be appointed for the purpose of running the mills. 7. Then the High Court stated : We have already set out the circumstances which in our opinion make it necessary that a receiver should be appointed to take charge of the property of defendants first set whether under the finance agreement of July 1948 there was a charge created on the property, moveable and immovable, or not. The Receiver will not interfere with the running of the mills except under express orders of the Court and to the extent when it becomes necessary by reason of the value of the security being jeopardized by any action of the defendants. 8. Then the High Court pointed out that the Collector had the power under s. 3 of the Industrial Disputes Act to make arrangements for the running of the mills. Finally the High Court observed : It may be necessary from time to time to give directions to the receiver. The parties may also want portions of this order to be clarified or other directions obtained. The lower court may give such directions to the receiver or to the parties as it may consider just and proper. In case further directions are necessary or the receiver or the parties are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed by any action of the persons running the Mills. The receivers are appointed over the share of the defendants II set only, for the purpose of preservation and protection and realization of the rent. 11. This order runs on the same lines indicated by the High Court in its earlier order in respect of the share of defendants 1st set. What is to be noted is that under this order the Receivers were prohibited from running the mills except under the specific orders of the said court or of the High Court. On April 5, 1954, a preliminary decree was made in the suit, and under that decree the defendants were directed to deposit a sum of ₹ 18,00,152 in court within the prescribed date and in default the plaintiff was given a right to apply for a final decree for the sale of the assets of the spinning mills. There was a further direction that in case the nett sale proceeds of the said property were found insufficient to satisfy the plaintiff's claim, the plaintiff would get a personal decree against defendants 1st set and defendants 2nd set for the balance of his claim. The Receivers were directed to continue on the property until discharged. Under the preliminary decree, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the rights and obligation of the parties which are or may be the subject matter of suit No. 76 of 1949 or in any litigation between the parties and notwithstanding anything contained herein but subject however to the express provision in the preceding paragraph of this clause it will be open to the petitioners to seek their remedies in any manner provided by law, and without prejudice to the rights of the parties to obtain a stay order from the Hon'ble High Court or any other Court. 14. What is the effect of this order ? Learned counsel for the appellant contends that this order embodies an internal arrangement between the defendants for running the mills and that it does not in any way enlarge the scope of the orders dated August 22, 1949, and December 1, 1951, under which the Receivers were appointed. We do not think that the scope of the orders is so limited. The combined effect of the said earlier orders was that the Receivers should take possession of the entire properties of the two sets of defendants. But the Receivers were not given the power to run the mills without specific directions to that effect by the court. The Civil Judge by his order dated March 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the court for extension of the lease for three more years, thereby accepting his possession under the Receiver, though the court on January 16, 1959, dismissed that application on the ground that the lease was only a stopgap arrangement and that it was for the Receiver to make a fresh arrangement for the future under the supervision and directions of the Civil Judge under whose preliminary decree he derived authority. It is manifest from the aforesaid orders that the Receiver was put in possession of the entire property of the defendants, that he was not empowered to run the mills personally, that by subsequent orders he was directed to lease out the mills to the parties in the manner prescribed and that under the final order he was to take over possession and make other arrangements for running the mills. In the premises, we find it very difficult to accept the argument of learned counsel that the Receiver was not put in possession of the mills, but the mills continued to be in the possession of the defendants. We hold on a construction of the relevant orders that the flour mill of the appellant was also put in the possession of the Receiver and that the appellant was running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as appointed. And when the bill upon which the appointment was made is afterwards dismissed upon demurrer, the duties of the receiver cease as between the parties to the action. ......... And although as between the parties to the litigation his functions have terminated with the determination of the suit, he is still amenable to the court as its officer until he has complied with its directions as to the disposal of the funds which he has received during the course of his receivership. ........ But an order of discharge does not necessarily follow, in all cases, because of the determination of the suit, and the court may, upon sufficient cause shown, either discharge or continue the receiver, according to the exigencies of the case. 21. The learned author makes a further distinction at p. 986 between the following two classes of cases : Since the final decree in the cause is generally decisive of the subject-matter in controversy, and determines the right to the possession of the fund or property held by the receiver, it is usually the case that such decree supersedes the functions of the receiver, since there is then nothing further for him to act upon, although it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his dues. It cannot, therefore, be said that the suit has been finally disposed of. That apart, the preliminary decree in express terms directed the Receivers to continue till they were discharged. In the circumstances, we are definitely of the opinion that the Receivers continued by the preliminary decree are entitled to function in that capacity till they are discharged. 25. The third contention of learned counsel for the appellant raises the question whether in the circumstances of this case the Receiver could recover possession from the appellant only by instituting a regular suit against him for eviction. The facts germane to this contention may be briefly recapitulated. On January 14, 1956, the appellant executed a lease deed in respect of the flour mill in favour of the Receiver and there was an express recital therein that the lessee would deliver possession to the Receiver of all the demised premises upon the expiry of the term of lease. The said lease was executed as a part of a compromise scheme for running the mills. The term of the lease had expired. Thereafter the court directed the Receiver to take possession of the property and auction the same to the highest b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Bar are not of much relevance to the present case. Krista Chandra Ghose v. Krista Sakha Ghose [I.L.R.(1908) 36 Cal. 52.] is a case where a lease was granted by a Receiver acting under an order of court and the possession of the property had been given to the lessee, and subsequently certain parties applied to the court for a declaration that the lease was invalid on the ground that it was obtained by collusion. There the court held that no summary order could be passed to set aside the lease and the proper remedy would be by a suit against the Receiver and also against the lessee. In that case the lessee, though he was a party to the suit, acquired a leasehold right under the lease deed and third parties, who offered a higher rent, sought to question the lease on the ground of collusion. Woodroffe, J., held that the dispute could only be decided in a properly instituted suit. The Rajasthan High Court in Nanakchand v. Pannalal held that a Receiver could not recover the rent from a lessee in a summary order of the court, but should file a suit just like any other landlord. The Allahabad High Court in Loonkaran v. I. N. John AIR1961All59 , though it conceded that where a lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put in possession under a document described as a lease deed. In effect the Receiver, during the course of the management, entrusted each mill to one of the partners so that the mills might be properly worked under experienced hands. The appellant expressly agreed to put the Receiver in possession of the mill after the expiry of three years. No question of deciding the conflicting claims of a lessee and a third party arises in this case; nor is the court called upon to pronounce on the vested rights of a lessee in conflict with those of the Receiver. But this is a simple case of a court in the course of its administration of the estate through the agency of a receiver making a suitable provision for the running of the mills. As the agreed term had expired, the court, in our view, could certainly direct the appellant to put the mill in the possession of the Receiver. 30. Lastly it has been brought to our notice that an application for the discharge of the Receiver is pending in the lower court. Any observations that we have made in this judgment are not intended to affect the merits one way or other in the disposal of that application. That application will be disposed of in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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