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Show View Tea Co. Pvt. Ltd. v. West Bengal Tea Board Development Corpn. Ltd. .
Judgment Summary — Ghose, J. (Application for stay of order dated 14 January 1980)
Factual and Procedural Background
This opinion concerns an application by the appellant for a stay of an order under appeal dated 14 January 1980, passed by the court of first instance. The impugned order restrained the appellant from dealing with or disposing of its property known as the Kumai Tea Estate and directed that an aggregate sum of Rs. 8 lakhs, which was lying with the Union Bank of India at India Exchange Place Branch, be kept separately in a suspense account. The appellant was restrained from withdrawing part of that amount until the disposal of the suit.
After preferring an appeal against that judgment and order, the appellant filed the present application seeking modification/stay of the impugned order. Counsel for both parties appeared and made submissions; the court considered the submissions and authorities relied upon before making an interim modification of the order under appeal and providing directions for the handling of the Rs. 8 lakhs pending final disposal of the appeal.
Legal Issues Presented
- Whether a court has power to indemnify a Receiver for sums he claims to be entitled to where, at the time of the order, the property or assets have passed out of the seisin (custody) of the court.
- Whether a Receiver is entitled to indemnity for expenses he has properly incurred where the court has not previously sanctioned those expenses.
- Whether the moneys lying with the bank (Rs. 8 lakhs) should be released to the appellant where the appellant's property (Kumai Tea Estate) remains and is argued to be of greater value than any claim the Receiver may have.
- Whether the trial judge's order may have been made on the basis of Order 39 Rule 1 of the Civil Procedure Code (CPC) and the effect of that provision on the Receiver's claim.
Arguments of the Parties
Appellant's (Mr. Anindya Mitra) Arguments
- The impugned judgment and order should not have been passed because, once the property/assets had passed out of the seisin of the court, the court had no power to indemnify the Receiver for any sums the Receiver might claim.
- On the facts, the properties and assets over which the impugned order was made were admittedly out of seisin of the court at the time of the order.
- The Receiver is only entitled to expenses properly incurred and, in the appellant’s submission, until the court sanctions such expenses (either before or after they are incurred) no money can be said to be due to the Receiver; therefore the Receiver cannot claim relief in respect of alleged dues which have not been sanctioned.
- The Kumai Tea Estate remained available and its value would exceed any claim the Receiver might have, so the monies lying in the bank should be released to the appellant.
- Authorities relied upon included Halsbury's Laws of England (Vol. 32, 3rd Ed., paras noted), British Power Traction & Lighting Co. Ltd in Re (Halifax Joint Stock Banking Co. Ltd v. British Power Traction & Lighting Co. Ltd (1906) 1 Ch 497), Boehm v. Goodall (1911) 1 Ch 155, Ali Ismail Doodha v. Momin Bibi (AIR 1954 Cal 386), and Kerr on Receivers.
Respondent's (Mr. Bachawat) Arguments
- The respondent was entitled to be indemnified out of the assets of the business of the appellant (i.e., the Kumai Tea Estate).
- The Receiver, in any event, has a charge against such assets (the compensation of a receiver is a charge upon funds that may come into his hands) and is entitled to be indemnified even in priority to certain other claims; the respondent relied on Woodroffe's Law Relating to Receivers (6th Ed.) and Halsbury's Laws of England.
- The respondent also relied on the same case cited by the appellant (Halifax Joint Stock Banking Co. Ltd v. British Power Traction & Lighting Co. Ltd (1906) 1 Ch 497) and on authorities cited in that judgment (e.g., Burt, Boulton & Hayward v. Bull; Strapp v. Bull, Sons & Co.).
- Respondent relied on the proposition that a discharged receiver retains a lien on the estate for his claims and allowances.
Table of Precedents Cited
| Precedent / Authority | Rule or Principle Cited For | Application by the Court (as stated in the opinion) |
|---|---|---|
| Halsbury's Laws of England, Vol. 32, 3rd Edition (paras 710, 734, 735; pp. 428, 438, 439) | Statements on a Receiver's right to be indemnified out of the assets of the business in his hand. | Cited by both parties. The court acknowledged these statements among the authorities relied upon when considering the Receiver's right to indemnity. |
| Halifax Joint Stock Banking Co. Ltd v. British Power Traction & Lighting Co. Ltd ((1906) 1 Ch 497) — (Re British Power Traction & Lighting Co. Ltd) | Principles on the manager/receiver's authority to incur expenses and the circumstances in which indemnity will be allowed; quoted observations of Warrington J. on the need for leave to incur expenses beyond court-provided funds. | Cited by both parties. The court recorded the quotation relied upon (Warrington J.) and considered the case among others in assessing the extent of a Receiver's entitlement to indemnity, but reached a conclusion based on the seisin of assets in the court. |
| Boehm v. Goodall ((1911) 1 Ch 155) | Holds that a Receiver appointed over a partnership had no right to be indemnified by the partners personally and could only look to assets under the control of the court for indemnity. | Relied upon by the appellant. The court considered this authority when observing that a Receiver's indemnity is confined to assets remaining in the custody of the court. |
| Ali Ismail Doodha v. Momin Bibi, AIR 1954 Cal 386 (decision of P.B. Mukharji J.) | Holds that a Receiver's lien is not lost merely because he has been discharged and handed over possession to a successor; the past receiver may apply for payment out of estate in hands of successor where assets remain in seisin. | Relied upon by the appellant; the court noted the distinction that in Ali Ismail Doodha the assets remained in seisin of the court and in the hands of the present receiver, unlike the present case. |
| Kerr on The Law and Practice as to Receivers (15th Edition) | Statements on the right of a receiver to be indemnified out of the assets over which he was appointed receiver. | Cited by the appellant. The court noted reliance on this treatise in submissions but reached its prima facie view regarding the confinement of indemnity to assets in the custody of the court. |
| Woodroffe's Law Relating to Receivers (6th Edition) | Statements that: (a) compensation of a receiver is a charge upon funds which come into his hands; (b) receivers are entitled to indemnity even in priority to some other claims; (c) a discharged receiver has a lien on the estate. | Cited by the respondent. The court recorded these statements as relied upon in support of the respondent's contention that the Receiver was entitled to indemnity out of the business assets. |
| Burt, Boulton and Hayward v. Bull ((1895) 1 QB 276) | Authority cited for the duty and right of a court-appointed manager/receiver to carry on business and to be indemnified out of assets for expenses properly incurred. | Cited within the Halifax Joint Stock Banking Co. Ltd judgment which both parties relied upon; the court noted these authorities in the course of recording submissions and authorities. |
| Strapp v. Bull, Sons and Co. ((1895) 2 Ch 1) | Another authority on the manager/receiver's duties and rights to indemnity for properly incurred expenses. | Also cited within the Halifax report and relied upon by the respondent; the court recorded this reliance among the authorities considered. |
Court's Reasoning and Analysis
The court set out the competing contentions and the authorities relied upon. Its reasoning proceeded in the following steps, limited to the points expressly stated in the opinion:
- Prima facie view: The court observed that a Receiver's right to be indemnified out of the assets over which he had been appointed Receiver or Manager, and in respect of expenses incurred in the discharge of his duties under the order of appointment, is confined to those assets that remain in the custody (seisin) of the court and only so long as they remain in custody of the court. This is presented by the court as a prima facie legal position.
- Application to facts: The court applied that principle to the facts before it and noted that, in the instant case, the properties over which the respondent had been appointed manager/receiver were not in the seisin of the court at the time of the impugned order. On that factual basis, the court stated that the Receiver had no special right or lien on those properties and had no right to be indemnified out of those assets in particular.
- Order 39 Rule 1 CPC: The court acknowledged that the claim in the instant case was also made on the basis of Order 39 Rule 1 of the CPC and that the trial judge's order might have been made on that basis. The court indicated that the correctness of the order under appeal on that and other bases would be finally adjudicated at the hearing of the appeal.
- Interim/conditional relief: Rather than finally deciding the competing contentions on indemnity and priority, the court fashioned an interim modification of the impugned order to meet the "justice of the case" pending final adjudication of the appeal. The court's interim arrangement aimed to permit the appellant to carry on its tea business while preserving funds and safeguards for the respondent's potential claim.
- Precise conditions: The court specified detailed conditions by which Rs. 4 lakhs of the Rs. 8 lakhs could be withdrawn and used (separate account, use only for carrying on tea business at Kumai Tea Estate), how tea sale proceeds should be handled (part set aside at Rs. 2 per kilogram until Rs. 4 lakhs is reached), and how the remaining Rs. 4 lakhs should be placed in short-term fixed deposit until further orders. Monthly abstracts to the respondent's advocate and other procedural directions were ordered.
- Costs and further procedure: The court ordered that costs of the application shall be costs in the appeal and gave procedural directions for filing paper books, cross-objections, and possible early hearing of the appeal.
Holding and Implications
Core Ruling: The court modified the order under appeal only to the extent stated in its interim directions: the appellant was permitted to withdraw Rs. 4 lakhs of the Rs. 8 lakhs held in the bank subject to specified conditions and safeguards; the balance Rs. 4 lakhs was to be kept in a short-term fixed deposit account until further orders. The remainder of the trial court's order continued in force until the appeal was disposed of.
Direct implications for the parties:
- The appellant may withdraw Rs. 4 lakhs from the funds held in the Union Bank of India only for carrying on the Kumai Tea Estate business, keep those monies in a separate account, and follow the directions regarding sale proceeds and bookkeeping.
- Rs. 4 lakhs of the fund shall remain in a short-term fixed deposit and continue to be preserved until further order.
- Monthly abstracts of the appellant's dealings with the Rs. 4 lakhs are to be provided to the respondent's advocate, and specific measures regarding tea sale proceeds were ordered to build up a further safeguard fund.
- Costs of the application were made costs in the appeal; other procedural directions were given for progressing the appeal.
Broader precedent or legal development: The opinion expresses a prima facie view about the confined scope of a Receiver's right to indemnity (limited to assets in the custody of the court) and records the authorities relied upon, but it frames these conclusions as reasons for interim relief and indicates that the final adjudication on the order under appeal will occur at the hearing of the appeal. The opinion does not state that it is creating a new binding precedent beyond the resolution of the interim application.
Ghose, J.:— This is an application by the appellant for stay of the order under appeal dated 14th January, 1980 passed by the court of the first instance. By and under the said order the court of the first instance restrained the appellant from dealing with or disposing of its property known as Kumai Tea Estate. By and under the said order the Court of the first instance also directed that an aggregate sum of Rs. 8 lakhs which has been lying with the Union Bank of India at India Exchange Place Branch to be kept separately in Suspense A/c and the appellant was restrained from withdrawing part of the said amount until the disposal of the suit.
2. Against the said judgement and order this application has been made as stated hereinbefore after preferring an appeal against the said judgement and order of the single Judge for reliefs mentioned in the petition. Mr. Anindya Mitra, learned counsel appearing on behalf of the appellant submitted that the impugned judgement and the order should not have been passed by the learned Judge of the court of the first instance on the following grounds—
(i) After the property or assets of the appellant had passed out of the seisin of the court, the court had no power to indemnify the Receiver for any sums that the Receiver was entitled to receive admitting that the Receiver was entitled to any such sum.
(ii) Admittedly in the instant case the properties and assets over which the impugned order has been passed went out of seisin of the court at the time of passing of such order.
(iii) The Receiver was entitled to any of the expenses which he had properly incurred. Until the court sanctions such expenses either before such expenses are incurred or after they are incurred it cannot be said that any money is due to the Receiver as is the case in the instant matter and as such the Receiver is not entitled to claim any relief from the court in regard to any of his alleged dues.
(iv) In any event, Kumai Tea Estate, the property of the appellant, was there and the value of the said Tea Estate, would be much more than the claim of the Receiver, if any, against the appellant, so the moneys lying in the Bank should be released.
3. Mr. Mitra in support of his submissions relied on Halsburys Laws of England, volume 32, 3rd Edition—
Page 428 - Paragraph 710
Page 438 - Paragraph 734 and
Page 439 - Paragraph 735.
4. Mr. Mitra also relied on the case of British Power Traction and Lighting Co. Ltd. in Re, Halifax Joint Stock Banking Co. Ltd. v. British owner Traction Lighting Co. Ltd. reported in (1906) 1 Ch 497. Mr. Mitra relied on the observation of Warrington J. appearing in the first paragraph at p. 506 of the said Report. The said observation is as follows:—
“It seems to me the true position in these cases is that the order is intended to limit his general authority, and, if he finds that the fund provided by the Court is not sufficient, it is his duty to cause the matter to be brought before the Court, so that, if it sees fit, it may increase it, or give him leave to incur further expenses or liabilities, which comes to the same thing. If, without such an application being made, he incurs expenses and liabilities exceeding the limit, he is, in my opinion, not entitled to be indemnified against them unless he can show that, having regard to all the circumstances under which were incurred, he was justified in incurring them without first obtaining leave. If he succeeds in showing this, then I think the expenses and liabilities would be properly incurred, but not otherwise. What circumstances would justify the conduct of the manager in so increasing such expenses and liabilities without leave cannot, I think, be defined in general terms, but must be determined in each particular case. I will only say that, in my opinion, it would not be enough to shew that the expenses or liabilities were incurred bona fide and in the ordinary course of business.”
5. Mr. Mitra also relied on the case of Boehm v. Goodall, (1911) 1 Ch 155 wherein it was decided that the Receiver appointed over a partnership had no right to be indemnified by the partners personally and could only look to the assets under the control of the court for his indemnity.
6. Mr. Mitra next relied on the decision of P.B Mukharji J. (as his Lordship then was) in Ali Ismail Doodha v. Momin Bibi, AIR 1954 Cal 386. The said case laid down that a Receiver's lien is not lost merely because he has been discharged and has handed over the possession of the estate to another receiver appointed in his place. The past receiver is entitled to apply for payment to him such sums of money as have been allowed to him on passing of accounts out of the estate in the hands of the receiver who has succeeded him. It should be noted that in the said case the assets were still in the seisin of the court and in the hands of the present receiver.
7. Mr. Mitra last relied on Kerr on The Law and Practice as to Receivers, 15th Edition and has relied on the statements of law made at the bottom of p. 236 and p. 237 on the right of a receiver to be indemnified out of the assets over which he has been a pointed receiver.
8. Mr. Bachawat appearing on behalf of the respondent submitted that : (1) The respondent was entitled to be indemnified out of the assets of the business of the a appellant i.e Kumai Tea Estate and (2) The Receiver in any event has charge as against such assets and has relied on Woodroffe's Law Relating to Receivers, 6th Edition and the observations made by the learned author appearing at pp. 234, 235 and 238 of the said volume. The statements of law as made in the said passages are to the following effect:—
(a) “The compensation of a receiver is a charge upon the funds which may come into hands”. …….
(b) “The Receivers are entitled to be indemnified even in priority to the claims of persons who have advanced money under an order making the repayment of such advance as the first charge of the assets.”
9. Mr. Bachawat also relied on the statement of law appearing at p. 239 of the said volume to the effect that—
“A Receiver, though discharged, has a lien on the estate for his claims and allowances.”
10. Mr. Bachawat also relied on the above-mentioned case of British Power Traction and Lighting Co. Ltd in Re. Halifax Joint Stock Banking Co. Ltd. v. British Power Traction and Lighting Co. Ltd., reported in (1906) 1 Ch 497, the same case which was relied on by Mr. Mitra. Mr. Bachawat relied on the following observations appearing at p. 505 of the said judgement in the said report:—
“The law as to the position of a manager appointed by the Court where no special provision is made for meeting expenses and liabilities incurred by him, is not disputed, and is, indeed, beyond dispute. It is, on the one hand, the duty to carry on the business, and for that purpose to enter into proper contracts on his own responsibility, and it is, on the other hand, his right to be indemnified out of the assets against expenses and liabilities properly incurred in the execution of his duty : Burt, Boulton and Hayward v. Bull ((1895) 1 QB 276); Strapp v. Bull, Sons and Co. ((1895) 2 Ch 1).”
11. Mr. Bachawat also relied on the statement of law on the subject in Halsbury's Laws of England, volume 32, 3rd Edition
12. Paragraphs 710 and 734 at 428 and 438. The said statements of law are on the Receiver's right to be indemnified out of the assets of the business in his hand.
13. Prima facie it appears to us that the Receiver's right to be indemnified out of the assets over which he had been appointed Receiver or Manager and had incurred expenses in connection with the discharge of his duties cast upon him by the order of appointment is confined to such assets as remain in the custody of the court and so long as they remain in the custody of the court. In the instant case the properties over which the respondent was appointed man er was not in the seisin of the court and as such the Receiver had no special right or lien on the said properties nor there is any right of the Receiver to be indemnified out of the said assets in particular.
14. The claim in the instant case was made also on the basis of Order 39 Rule 1 of the CPC and the order of the learned trial Judge might have been made on that basis. In any event the order under appeal shall be finally adjudicated upon at the hearing of the a peal but, in our opinion, the justice of the case will be sufficiently met if the following order which we are passing, is passed in this application.
15. The applicant shall be entitled to withdraw a sum of Rs. 4 lakhs out of the monies lying with the Union Bank of India at India Exchange Place solely for the purpose of carrying on its business of tea relating to the Kumai Tea Estate. The appellant shall keep the said sum of Rs. 4 lakhs in a separate account and shall use the same only for the aforementioned purpose. The sale proceeds of the tea crop of the said Kumai Tea Estate shall be deposited in a separate account and out of such sale proceeds monies at the rate of Rs. 2/- per kilo-grime should be kept in another separate account until a sum of Rs. 4 lakhs is reached by such sale proceeds.
16. The balance sum of Rs. 4 lakhs out of the said sum of Rs. 8 lakhs which has been kept in a suspense account shall be kept in a short term fixed deposit account and shall be continued to be kept in such short term fixed deposit account until further orders.
17. An abstract of the statement of account shall be sent to the Advocate on record of the respondent in respect of the appellant's dealing with the above, mentioned sum of Rs. 4 lakhs once every month. The said abstract of account shall also indicate the amount of money set apart in terms of this order out of the sale of tea crop of the Kumai Tea Estate.
18. The order under appeal is modified only to the aforesaid extent and the rest of the order of the Court of the first instance shall continue until disposal of the appeal.
19. Costs of this application shall be costs in the appeal.
20. The respondent waives service of the notice of appeal. Settlement of index is dispensed with. Cyclostyled or type written or printed paper book shall be filed within three weeks from date. The order under appeal and the order admitting the appeal shall be drawn up with utmost expedition. The respondent shall be entitled to file a cross-objection within a week from date. A copy of the plaint and a copy of the written statement may be included in a supplementary paper book and the admissibility of the same shall be decided at the time of hearing of the appeal.
21. Liberty is given to the parties to apply for early hearing of the appeal as soon as the paper book have been filed.
22. A.N Sen, C.J:— I agree.
23. Ordered accordingly.
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