Rameshwar Singh v. Chuni Lal Shaha

Mookerjee and Panton, JJ.:— This appeal is directed against an order made on the receiver in a mortgage-suit, who was appointed at the instance of the first mortgagee, now appellant before us. It appears that on the 4th May, 1915, the first mortgagee who held a mortgage over the entire property instituted a suit to enforce his security against the mortgagor and the second mortgagee. Seven days later he applied for the appointment of a receiver for the preservation of the property, for payment of arrears of rent due to the superior landlord, for the realization of rent and other income from the property and for payment of the income to the plaintiff in reduction of his claim under the mortgage. The Sub-ordinate Judge made a conditional order for the appointment of a receiver on the same day. The order was made absolute on the 15th July, 1915. Since then, the receiver has been in possession and the order for payment of the profits in reduction of the dues on the first mortgage has been duly carried out. On the 12th July, 1916, the mortgagee obtained a decree for Rs. 1,21,540. Meanwhile, the second mortgagee, who held a mortgage on one-half only of the property, had instituted a suit to enforce his security, without joining the first mortgagee as a party. He obtained a decree on the 2nd August, 1915, for the sum of Rs. 6,177. This decree was put into execution, and at the sale which followed, the second mortgagee purchased the equity of redemption in relation to his mortgage for a sum of Rs. 425 on the 10th August, 1916. It appears that during the pendency of these proceedings, the second mortgagee had managed to obtain an order in his suit directing the receiver to pay him a portion of the income in his hands derived from the mortgaged property. What followed is not clear, but we find that on the 23rd August, 1918, the second mortgagee made an application to the Court for the purpose of intercepting the whole of the income of the property purchased by him and to receive the amount for the satisfaction of his own dues. This application was opposed by the first mortgagee, but the Sub-ordinate Judge made an order in favour of the second, mortgagee on the 25th February, 1919 The legality of this order is called in question in the present appeal.

On behalf of the first mortgagee it has been contended that the order for the appointment of a receiver on the 11th May, 1915, is binding upon the mortgagor as also the second mortgagee in whose presence it was made and that the circumstances which had happened did not justify a modification of that order. Out attention has been invited to the case of Penney v. Todd where it was ruled that the possession of a receiver in a mortgaged-suit was primâ facie for the benefit of the party who had obtained the appointment. On this principle it has been argued that the receiver who was appointed at the instance of the first mortgagee holds the property for his benefit alone and is bound to make over to him the entire income for the satisfaction of his dues. In our opinion, this contention is clearly well-founded.

The order for the appointment of the receiver, made conditionally on the 11th May, 1915, and confirmed on the 15th July, 1915, was passed in the presence of the mortgagor as also the second mortgagee. They are equally bound by the order in question. Nothing has happened since then which would entitle either of them to avoid the consequences of that order. The second mortgagee has contended that the fact that he has obtained a decree on his mortgage and has purchased the equity of redemption in execution of that decree has altered the position. We are of opinion that there has been no change in his position in relation to the receiver at the instance of the first mortgagee. If neither the second mortgagee nor the mortagagor is entitled to question the propriety of the order for appointment of the receiver, the circumstance that the equity of redemption has been transferred from the mortgagor to the second mortgagee cannot place the latter in a position of advantage. In his character as purchaser in execution of his own decree, he is as much bound by the order for the appointment of the receiver as the mortgagor. If the mortgagor had made an application to the Court to modify the order for the appointment of the receiver and had attempted to intercept the profits, no Court would have listened to him; the second mortgagee does not now stand in a different position. An argument was addressed to us on the assumption that the first mortgagee was a mortgagee by way of conditional sale and that as such he had obtained a decree for foreclosure. On that assumption it was argued, on the authority of the decision in Khubsurat Koer v. Saroda Charan Guha , that a receiver should not have been appointed at his instance. On an examination of the record, however, it transpires that the decree was for sale of the mortgaged properties. Consequently, no question can arise as to the propriety of the order for the appointment of a receiver. It was suggested by the second mortgagee a receiver Could not be appointed at the instance of a mortgagee who held a simple mortgage. We are unable to accept this contention as well-founded on principle; there is indeed authority for the contrary view: Inugutrli Venkata Rajagopala Suryarow Bahadur v. K. Baswi Reddy . There is no foundation for the contention that a mortgagee who is not entitled to possession of the mortgaged properties is not entitled to ask for the appointment of a receiver. Whether the mortgagee is or is not entitled to possession, he may invite the Court to appoint a receiver, if the demands of justice require that the mortgagor should be deprived of possession. The principle applicable to cases of this, character was lucidly stated in the case of Herbert v. Greene . “In a foreclosure suit or suit to raise a charge affecting lands by sale of the lands, an order is not made for the appointment of a receiver, unless under the following circumstances; first, where interest is due on the security, the Court usually requiring an affidavit that interest for one year at least is due; or, secondly, where the property is in danger, for example, if the lands are held under a lease and head rent has been permitted to remain unpaid and in arrears; thirdly, where there is reason to apprehend that the sum for which the lands shall be sold will be insufficient to pay the encumbrances or charges thereon.” [See also Weatherall v. Eastern Mortgage Agency Co. , Eastern Mortgage and Agency Co. v. Fakuruddin Mohamed Chowdhury .] If we examine the case from a somewhat different point of view, the unreasonableness of the argument advanced on behalf of the second mortgagee becomes still more patent. If the property is not of sufficient vaine to meet the dues of all the incumbrances, it is clear that when the property is sold, the first mortgagee will be paid first and thereafter the remainder, if any, will be applied in discharge of the claims of the second mortgagee. It is inconceivable that if the relation between the first mortgagee and the second mortgagee is of this description, the latter by purchase of the equity of redemption should become entitled to intercept the profits of the mortgaged property before the dues of the first mortgagee have been satisfied.

The result is that this appeal is allowed, the order of the Court below set aside and the application of the 23rd August, 1918, dismissed with costs in both the Courts.

S.M

Appeal allowed.