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Manindra Chandra Ray Chaudhury And Another v. Suniti Bala Debi And Another .
Concise Analytical Summary of the Opinion
Factual and Procedural Background
The opinion arises from long-standing mortgage litigation between the mortgagor Suniti Bala Debi and mortgagees including Dhara Sundari (and later assignees). On 5 March 1907 Suniti Bala executed a mortgage in favour of Dhara Sundari and Sarajini. Dhara Sundari sued for her share of the mortgage-money on 25 March 1909. The Subordinate Judge initially decreed for Dhara Sundari; on appeal this Court set aside that decree while upholding the validity of the mortgage and remanded the case for amendment of the plaint and a proper decree. Suniti Bala appealed to the Privy Council; the Judicial Committee affirmed this Court's decision on 30 May 1919 (reported as Sunitabala Debi v. Dhara Sundari Debi Chowdhurani).
During the Privy Council appeal the plaintiffs (mortgagees) applied for appointment of a Receiver (application dated 27 April 1916). A Receiver was appointed by the Subordinate Judge on 22 September 1916; this order was unsuccessfully appealed by the mortgagor on 15 December 1916. The Receiver took possession in January 1917 and remained in possession until 31 December 1925. Various assignments and procedural steps occurred: other mortgagees assigned interests (one assignee, Heramba, was eventually joined as co-plaintiff), amendments were made to the plaint after the Privy Council decision, and a preliminary decree on the mortgage was passed by the Subordinate Judge on 24 March 1924. Certain compound interest claims were disallowed and later modified on appeal by this Court on 25 March 1925. The date for payment of the mortgage-money was fixed as 25 September 1925.
After the preliminary decree, the Subordinate Judge discharged the Receiver (order dated 26 March 1924); the plaintiffs successfully appealed that discharge to a Divisional Bench (order dated 30 April 1925) which set aside the discharge and directed that the Receiver continue in charge till 31 December 1925. The mortgagor sought leave to appeal to the Privy Council against the preliminary decree; leave was granted on 22 May 1925 but later rejected for non-compliance by this Court (26 November 1925) and a review application was dismissed (30 November 1925).
Plaintiffs applied for a final decree on 12 November 1925 (asserting they delayed because of pendency of Privy Council leave proceedings). The Subordinate Judge fixed hearing of the application for final decree on 9 January 1926. On 30 November 1925 the mortgagor applied to discharge the Receiver relying on the High Court's 30 April 1925 judgment; mortgagees opposed discharge and alternatively sought a fresh appointment. The Subordinate Judge, by judgment dated 4 January 1926, discharged the Receiver and rejected mortgagees' alternative prayer for a new Receiver. The final decree in the mortgage suit (the ultimate decree) was signed on 13 January 1926.
Financial context stated in the opinion: before 1909 mortgagees were paid about Rs. 900 from interest; from 1909 to the Receiver's appointment in 1916 no interest was paid. By the time of the final decree the appellants' share had risen to about Rs. 2,50,000; a co-mortgagee Heramba's share amounted to about Rs. 1,60,000, of which roughly Rs. 1,20,000 held by the Receiver had been applied in settlement with Heramba (reducing his residual claim to about Rs. 10,000).
Legal Issues Presented
- Whether an appeal lies against an order of a Court discharging a Receiver (i.e., is an order refusing or discharging a Receiver appealable under O. 43, R. 1(s) read with O. 40 of the Code of Civil Procedure).
- Whether, on the facts of this case, the Subordinate Judge's discharge of the Receiver should be set aside and a Receiver appointed or continued to realize rents and profits of the mortgaged property until the mortgage-debt is satisfied.
Arguments of the Parties
Appellants' (Mortgagees') Arguments
- The mortgage is an English mortgage and, as interest has not been paid to the mortgagees, appointment of a Receiver is ordinarily appropriate.
- The Receiver's management of the mortgaged properties would be more beneficial than the mortgagor's management.
- The value of the mortgaged properties is insufficient to discharge the mortgage-debt, so a Receiver is necessary to protect mortgagees' interests.
- Having regard to all the circumstances, it is just and convenient that a Receiver should be appointed.
- On the procedural point, appellants contended that there had been no material alteration in the parties' positions since 1916 (when the Receiver was appointed) to justify discharge.
Respondent's (Mortgagor's) Arguments
- A preliminary objection was raised by Mr. Bose for the respondent that no appeal lies against the Subordinate Judge's order discharging the Receiver, relying on the language of O. 43, R. 1(s) and the distinction between an order appointing a Receiver and a refusal to appoint one.
- The respondent argued that where the Court declines to appoint a Receiver that refusal is not an order under O. 40, R. 1 and therefore not appealable under O. 43, R. 1(s).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sunitabala Debi v. Dhara Sundari Debi Chowdhurani (Privy Council, 30 May 1919) | The Privy Council affirmed the High Court's decision; case forms part of the appellate and procedural history and directed amendment of the plaint and further decree on the mortgage. | The Court followed the appellate directions flowing from that decision: the plaint was amended as directed and the case proceeded to preliminary and final decree consistent with the Privy Council's decision. |
| Boidya Nath Adya v. Makhan Lal Adya | Under the Civil Procedure Code of 1882, orders refusing appointment (or refusing relief) were treated as appealable. | Used to show historical support for the proposition that an order refusing relief (or discharging a Receiver) can be appealable and to counter the respondent's objection on appealability grounds. |
| Khagendra Narain Singh v. Shashadharjha | Similar to Boidya Nath Adya — under the earlier Code such orders were appealable. | Cited alongside Boidya Nath Adya to demonstrate precedent for appealability of refusals under earlier procedural law. |
| Hari Lal v. Pryag Ram | Under the present Code an objection that no appeal lies from an order refusing temporary injunction (O. 39) was repelled; reasoning supports that refusal orders can be subject to appeal. | The Court accepted the reasoning in Hari Lal v. Pryag Ram to reject the preliminary objection that an order discharging a Receiver is not appealable under O. 43, R. 1(s). |
| Ghanashyam Misser v. Gobinda Moni Dasi | Established that a Court may appoint a Receiver at the instance of a mortgagee in actions for foreclosure or sale where security appears insufficient or interest is in arrear. | Invoked as settled law to support the proposition that appellants had a right to seek appointment of a Receiver; helped form the basis for ordering appointment/continuation of a Receiver. |
| Eastern Mortgage & Agency Co., Ltd. v. Rakea Khatun | Same substantive principle: mortgagee may seek appointment of Receiver where security is suspect or interest in arrear. | Applied with other authorities to establish that the Court had jurisdiction and precedent support to appoint a Receiver for protection of mortgagee interests. |
| Weatherall v. Eastern Mortgage & Agency Co., Ltd. | Reinforces the rule that a Receiver may be appointed at the mortgagee's instance in appropriate cases (insufficient security/arrears of interest). | Relied upon (with the other mortgagee authorities) to justify appointing a Receiver in the circumstances of this case. |
Court's Reasoning and Analysis
The Court proceeded in two analytical stages: (A) admissibility of the appeal, and (B) substantive merits on appointment/continuation of a Receiver.
(A) Appeal admissibility
- The respondent's preliminary objection—that no appeal lies against an order discharging a Receiver under O. 43, R. 1(s) and O. 40—was considered and rejected. The Court reasoned that an order made in relation to an application under O. 40 is still an order "under O. 40" whether it grants or refuses the application; therefore sub-rule (s) of R. 1 of O. 43 applies to both grant and refusal.
- The Court relied on prior authority applying an analogous point under the earlier Code of 1882 (cases cited) and accepted the reasoning of this Court in Hari Lal v. Pryag Ram (which repelled a similar objection concerning orders refusing injunctive relief under O. 39) to hold that an appeal is maintainable against the Subordinate Judge's order discharging the Receiver.
(B) Substantive analysis on receivership
- Having held the appeal admissible, the Court examined whether the plaintiffs (mortgagees) had made a prima facie case for appointment/continuation of a Receiver. The Court observed that settled law in this jurisdiction permits appointment of a Receiver at the instance of a mortgagee in foreclosure or sale actions if there is reason to suspect the security is insufficient or if interest is in arrear (citing Ghanashyam Misser v. Gobinda Moni Dasi, Eastern Mortgage & Agency Co. v. Rakea Khatun, and Weatherall v. Eastern Mortgage & Agency Co.).
- The Court noted facts relied upon by the appellants: the mortgage was an English mortgage; no interest had been paid from 1909 until the Receiver's 1916 appointment; the property values and amounts due produced a situation in which the security might be insufficient; and the Receiver had managed the properties and applied funds to satisfy a co-mortgagee's claim by consent and court order.
- The Court rejected the Subordinate Judge's conclusion that the mortgagees could not apply afresh for a Receiver because "nothing has happened" since 1916: the Court found that circumstances relevant to execution were altered by the intervening procedural timeline (including the pendency of leave to appeal and the timing of the final decree), and that the mortgagees had a prima facie case for relief.
- On the legal effect of a preliminary or final decree, the Court observed that a mortgagee's right to ask for a Receiver is not affected simply because a decree for sale may have been passed, since the suit cannot be said to have terminated until the property is sold or the mortgage-money is paid.
- Balancing the established legal principles and the facts before it, the Court concluded that the Subordinate Judge's discharge of the Receiver should be set aside and a Receiver appointed (or continued) to realize the rents and profits to protect the mortgagees' interests pending satisfaction of the mortgage-debt.
Holding and Implications
Holding: The Court's dispositive ruling can be summarized as follows:
APPEAL ALLOWED; the Subordinate Judge's order discharging the Receiver is set aside and a Receiver is appointed (or continued) to realize the rents and profits of the mortgaged property until the mortgage-money is paid off either by sale in execution of the decree or by payment by the mortgagor.
Direct consequences and procedural directions given by the Court (as stated in the opinion):
- The order of the Subordinate Judge discharging the Receiver is discharged.
- A Receiver shall be appointed to realize rents and profits pending satisfaction of the mortgage debt.
- The Court may make proper orders enabling intending purchasers introduced by the mortgagor to buy (by private treaty) the whole or a sufficient portion of the mortgaged property to liquidate the mortgage debt; however the mortgagee is not bound to release any portion of the property on receipt of a partial payment of the mortgage-debt.
- The Court will, if available, appoint the same Receiver who was in charge till 31 December (the date referenced in the earlier judgment); if he is not available the Court will appoint a fit and proper person immediately.
- The appellants are entitled to the costs of the appeal: hearing-fee five gold mohurs.
- No order is necessary in the rule; records are to be sent down at once.
Implications for precedent and wider law: The Court applied and relied upon existing and settled principles regarding the appointment of Receivers in mortgage foreclosure or sale suits; the opinion treats those principles as settled law and applies them to the present facts. The judgment does not purport to lay down a new legal principle; it enforces established doctrine in the factual circumstances before the Court.
Note: This summary is confined strictly to the material contained in the provided opinion and does not add facts or interpretative statements beyond what the opinion itself states.
1. This appeal which arises acount of one stage of a certain case has a long history behind it. It is only necessary to state certain relevant facts in order to appreciate the question which has been raised before us.
2. One Suniti Bala Debi, the respondent before us, executed a mortgage in favour of her stepmother named Dhara Sundari and Sarajini on the 5th March 1907.
3. Dhara Sundari brought a suit for her share of the mortgage-money on the 25th March 1909. That suit was defended by the mortgagor Suniti Bala on various grounds. The Subordinate Judge grassed a decree in favour of Dhara Sundari. On appeal by Suniti Bala this Court set aside the decree while maintaining the finding of the trial Court with regard to the validity of the mortgage. This Court remanded the case for amendment of the plaint and after, amendment for making a proper decree on the mortgage for the entire mortgage money. Suniti Bala preferred an appeal to the Privy Council and the decision of the High Court was affirmed by the Judicial Committee. The case is reported as Sunitabala Debi v. Dhara Sundari Debi Chowdhurani(1). The decision of the Privy Council was passed on the 30th May 1919. During the pendency of the appeal before the Privy Council an application was made on behalf of the plaintiff on the 27th April 1916, before the Subordinate Judge for the appointment of a Receiver of the mortgaged properties. The Subordinate Judge made an order for the appointment of a Receiver on the 22nd September 1916 and an appeal was preferred against that decision to this Court; which was dismissed on the 15th December 1916. The Receiver took possession of the mortgaged properties in January 1917, and has been in possession till the 31st December 1925. The appellants before us got an assignment of the interest of Dhara Sundari in the mortgage on the 15th December 1920 and they, were added as plaintiffs henceforth in this judgment they will be described as plaintiffs in the suit. In the meantime, the other mortgagee Surajini had assigned her interest in the mortgage bond to one Heramba in April 1912 who was added originally as a co-defendant. He made an application subsequently to be transferred to the category of plaintiffs and joined as a co-plaintiff. This was objected to by Suniti Bala and the application of Heramba was dismissed on the 5th August 1921. This order of the Subordinate Judge was set aside on, revision by this Court in 1923 and Herambi was joined as a co-plaintiff in the mortgage suit. It appears the subsequently Heramba compromised his claim with the mortgagor and it was settled that Heramba was to receive a fixed sum of money in lieu of the debt according to the mortgage-bond. After the decision of the Privy Council, the plaint was amended as directed by the appellate Court and a preliminary decree on the mortgage was passed on the 24th March 1924 by the Subordinate Judge. He, however, disallowed certain claims of the mortgagees for compound interest. There was an appeal as against that part of the decree by the mortgagees and the decree of the Sub-ordinate Judge was modified allowing the appeal of the mortgagees, by this Court on the 25th March 1925. Under that decree, the date of the payment of the mortgage-money was fixed on the 25th September 1925. Just after the preliminary decree on the mortgage, the Subordinate Judge made an order discharging the Receiver appointed in 1916 by his order dated the 26th March 1924. The plaintiffs appealed against that order to this Court and the order was set aside by a Divisional Bench of this Court by its order dated the 30th April 1925. I shall come back to this decision, because a good deal of the controversy in this appeal depends upon the effect of this decision. On the 22nd May, 1925, the mortgagor obtained leave to appeal to the Privy Council as against the preliminary decree on the mortgage made by this Court on the 25th March 1925. This leave was rejected by this Court on the 26th November 1925 for non-compliance of certain orders made by this Court. Then, the mortgagor presented an application for review of that order of the 26th November which was rejected on the 30th November 1925.
4. Plaintiffs then made an application for final decree on the 12th November 1925 and their case is that they could not make the application immediately after the expiry of the date fixed by this Court for payment of the mortgage money because of the pendency of the proceedings relating to leave to appeal to the Privy Council. The hearing of this application for final decree was fixed by the Subordinate Judge on the 9th January 1926, the reason for fixing that date apparently was that the record of the case was in this Court. On the 30th November 1925, the day on which her application for review of the order in the Privy Council Department was rejected the mortgagor made an application before the Subordinate Judge for discharge of the Receiver, having based her application on the judgment of the High Court in connexion with the Receiver matter dated the 30th April 1925. Upon that, the mortgagees presented two applications in one of which they opposed the discharge of the Receiver and in the alternative they prayed for the appointment of a fresh Receiver. The Subordinate Judge by his judgment dated the 4th January 1926, granted the application of the mortgagor discharging the Receiver and rejected the application of the mortgagees for the fresh appointment of a Receiver. The final decree in the mortgage suit was made on the, 13th January 1916. It appears that before the mortgage suit was instituted in 1909, the mortgagees were paid Rs. 900 odd, out of the interest payable under the mortgage. From 1909 till the appointment of the Receiver in 1916 no interest was paid on the mortgage. Under the final decree at present, the share of the mortgage money to which the mortgagees, the appellants, are entitled, has come up to something like Rs. 2,50,000. The amount that was due to the other mortgagee Heramba Nath Banerjee amounted to something about Rs. 1,60,000. During the management of the Receiver he had in his hands an amount of about Rs. 1,20,000 which was paid in satisfaction of the money due to Heramba for his share with the consent of the present appellants under orders of this Court. The amount due to Heramba has been reduced to something like Rs. 10,000. The Subordinate Judge, in his judgment which is appealed against, purported to follow the directions of the High Court in its judgment of the 30th April 1925. It is unnecessary to recite all the observations made in that judgment, but the order was to this effect:
It is ordered that the order of the Court below discharging the Receiver be and the same is hereby set aside and in lieu thereof it is directed that for the present the Receiver do continue is charge of properties in suit till the 31st December 1925.
5. The Subordinate Judge observed that according to the judgment of the High Court, the mortgagees were entitled to make a fresh, application for the appointment of a Receiver if the execution of the decree is hampered by the act or conduct of the defendant; and as he was of opinion that nothing has happened to that effect, the mortgagees were not in a position to apply for the appointment of a Receiver. But the circumstances which the High Court had under consideration were altered by the fact that the mortgagees were not in a position to put the decree into execution before the 31st December 1925. The final decree, as has been already stated, had not been passed, and although the mortgagees had made an application in November for the final decree, it was not made till the 13th of January, after the date of the judgment appealed against. It is no doubt true that the Subordinate Judge felt himself bound by the observations made by this Court, but the appellants contend that having regard to all the circumstances that have been set forth above, there has been no alteration in the position of the parties since 1916 when the Receiver was appointed and there is no reason whatsoever why the Receiver should be discharged.
6. The grounds on which the appellants base their contention may be shortly stated. First, that the mortgage is an English mortgage and there has not been payment of any interest to the mortgagees and the order of appointment of a Receiver under such circumstances is almost a matter of course. Secondly, that the management of the Receiver of the mortgaged properties would be more beneficial. Thirdly, that the value of the mortgaged properties is insufficient for the purpose of payment of the mortgage-debt; and fourthly, that having regard to all the circumstances of the case, it is just and convenient that a Receiver should be appointed.
7. On behalf of the respondent Mr. Bose has taken a preliminary objection that no appeal lies against the order of the Subordinate Judge and his contention is based upon the language of O. 43, R. 1(s) which runs thus:
An appeal shall lie from the following orders under the provisions of S. 104, namely:—(s) an order under R. 1 or R. 4 of O. 40.
8. The argument seems to be that under O. 40, the Court may, by order, appoint a Receiver of a property, and there is an appeal against that order, but where the Court declines to appoint a Receiver that is not an order made under O. 40, R. 1 and, therefore, no appeal lies under O. 43, R. 1(s) of the Code. This argument does not appeal to us to be at all sound. When an application is made under O. 40, for the appointment of a Receiver, the Court may or may not make an order granting that application. If the Court refuses to make an order granting the application, it is no less an order made under O. 40, than if it had, made an order granting the application. It, therefore, comes within the provision of sub-R. (s) of R. 1 of O. 43. Under Code of Civil Procedure of 1882 such orders were appealable: see the cases of Boidya Nath Adya v. Makhan Lal Adya(2) and Khagendra Narain Singh v. Shashadharjha(3). Under the present Code a similar objection was raised as regards the maintainability of an appeal from an order refusing to grant a temporary injunction under O. 39 of the Code, the language of which is in similar terms as in O. 40. It was contended that there was no appeal against an order refusing to grant a temporary injunction. This argument was repelled by this Court in the case of Hari Lal v. Pryag Ram(4) and we need hardly say anything more in support of the proposition that an appeal in this case is maintainable than that, we accept the reasoning of the learned Judges in that case. The preliminary objection, therefore, fails.
9. Now the appeal being admissible it appears that the plaintiffs have made a prima facie case for the appointment of a Receiver. It is settled law in this country that the Court may appoint at Receiver at the instance of a mortgagee where the action is either for foreclosure or sale if there is reason to suspect that the security is insufficient or if the interest is in arrear: Ghanashyam Misser v. Gobinda Moni Dasi(5), Eastern Mortgage & Agency Co., Ltd. v. Rakea Khatun(6) and Weatherall v. Eastern Mortgage & Agency Co., Ltd.(7). The right of the mortgagee to ask for a Receiver is not affected by the fact that a decree for sale has been passed because the suit cannot be said to have terminated till the property is sold or the mortgage-money paid. (The judgment then discussed the circumstances of the case and proceeded.) The order of the Subordinate Judge is, therefore, discharged and in lieu thereof it is ordered that a Receiver be appointed for the realization of the rents and profits of the property till the mortage money is paid off either by sale in execution of the decree or by payment by the mortgagor. It will be open to the Court to make proper orders on the Receiver to give facilities to intending purchasers who may be introduced by the mortgagor or her people to purchase by private treaty the whole or a sufficient portion of the mortgaged property for the liquidation of the mortgage debt. It should, however, be remembered that the mortgagee would not be bound to release any portion of the mortgaged property on receipt of a portion of the mortgage-debt. The Court will appoint the Receiver who was acting as such till the 31st December to take charge of the property on the same security. If that gentleman is not available the Court will appoint a fit and proper person as Receiver to take charge of the property at once. The appellants are entitled to the costs of this appeal: hearing-fee five gold mohurs.
10. No order is necessary in the rule.
11. Let the records be sent down at once.
12. Appeal allowed.
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