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Rustomjee Dhunkibhai Sethna v. Frederick Gaebele And Anr.
Structured Summary of the Opinion
Factual and Procedural Background
The Plaintiff who obtained the rule before the Court is the Official Receiver of the Bombay High Court. On 9 May the Plaintiff obtained a rule calling on the Defendants to show cause why the Plaintiff should not take possession of a schooner called the "Rahia Khatoon" (the opinion also refers repeatedly to the "Rabia Khatoon") lying in the Hooghly and why the Defendant Krishna Shelly Bonnerjee, the Official Receiver of this Court, should not give up possession.
On 17 April 1918 a firm, Binoderam Balchand, commenced a suit in the Original Side of the Bombay High Court against J.A. Grant & Co., claiming (inter alia) that two sums (Rs. 1,71,644-10-6 and Rs. 1,36,763-4-9) were due and that repayment was validly charged on the "Rabia Khatoon." The Bombay Court appointed the Plaintiff (Mr. Sethna, Official Receiver of the Bombay High Court) as Receiver in that suit on 30 April 1918 to take charge of the sailing ship "Rabia Khatoon" and otherwise to recover freight and profits.
The Bombay attorneys telegraphed the Captain at Spence's Hotel, Calcutta on 1 May; an affidavit filed 9 May states that someone under Mr. Sethna's orders took formal charge of the vessel on 4 May.
Separately, Suit No. 519 of 1918 was instituted in this Court by Frederik Gaebele (instituted 26 April 1918). By order of 3 May the Official Receiver of this Court was appointed interim Receiver of the "Rabia Khatoon" and that appointment was continued on 10 May until the hearing of that suit.
Mr. Sethna (Bombay Receiver) applied to this Court for leave to proceed against the Receiver appointed by this Court and obtained a rule to show cause. The rule was listed for hearing on several dates (10 May, then 13 May, then stood over to 17 May and heard on 20 May). A preliminary objection was taken that Mr. Sethna had not obtained leave from the appointing Bombay Court before instituting the suit; the Court directed production of the Bombay orders. An order dated 15 May from the Bombay suit authorising Mr. Sethna to continue the present suit was produced before the Court on 20 May.
Legal Issues Presented
- Whether Mr. Sethna, having commenced the suit without the leave of the Bombay Court which appointed him, can continue the suit and these proceedings by virtue of leave subsequently obtained from that appointing Court (the 15th May order), or whether the suit should be dismissed for want of prior leave.
- Whether, if Mr. Sethna is permitted to continue the proceedings, he should be allowed to take possession of the "Rabia/Rahia Khatoon" (i.e., whether the Official Receiver of this Court should give up possession).
Arguments of the Parties
Defendant F. Gaebele's Arguments
- It was urged as a preliminary objection that Mr. Sethna had not obtained leave from the Court that appointed him (the Bombay Court) before instituting the suit; this was presented as a fatal defect which could not be cured by any leave subsequently obtained.
- Counsel for the Defendant relied on authority (the decision of Mr. Justice Bodilly in Pramatha Nath Ganguly v. Khetter Nath Banerjee) for the proposition that consent of the appointing Court to sue a Receiver is a condition precedent and cannot be rectified by subsequent permission.
Position advanced by the Plaintiff (and Mr. Sethna)
- Mr. Sethna obtained an order of the Bombay Court dated 15th May authorising him to continue the present suit; he relied on that leave to validate his commencement of the suit and to continue proceedings.
- Counsel for the Plaintiff in the suit before the Court (the immediate plaintiff seeking possession) also desired to raise questions of the Court's jurisdiction and service on J.A. Grant & Co., but the presiding Judge declined to go into those jurisdictional questions in this suit.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Pramatha Nath Ganguly v. Khetter Nath Banerjee | Held by Mr. Justice Bodilly that consent of the Court to sue a Receiver is a condition precedent and an action instituted without such consent cannot be rectified by subsequent permission. | The Defendant relied on this decision to argue the suit was fatally defective. The Court considered the decision but declined to follow it, expressing the view that it was not correct and that subsequent leave could validate proceedings. |
| Miller v. Ram Ranjan Chakravarti | A decree passed against a Receiver was set aside on appeal where no leave had been obtained to sue him; enunciates that a Receiver cannot be sued without leave of the Court which appointed him. | The decision is cited as authority supporting the proposition that leave is required; the Court acknowledged it but also considered other authorities that permitted subsequent leave. |
| Dunne v. Kumar Chandra Kissore | Reiterates Miller's principle: a Receiver can neither sue nor be sued without the leave of the Court appointing him. | The decision is noted as approving Miller; the Court recognised it but preferred the line of cases permitting subsequent validation. |
| Banku Behari Dey v. Harendra Nath Muherjee | Appellate Side held that instead of dismissing a suit brought against a Receiver without prior leave, the lower Court should have stayed the proceedings to allow leave to be obtained. | The presiding Judge followed this Appellate Side approach and cited it in support of his view that subsequent leave can validate proceedings and that dismissal is not the necessary remedy. |
| Sarat Chandra Banerjee v. Apurba Krishna Roy | Appellate Side held that after execution proceedings had been commenced leave could be subsequently obtained to execute against a Receiver. | The Court relied on this decision as part of the line of Appellate authorities concluding that subsequent leave can validate actions or executions against a Receiver. |
| The Maharajah of Burdwan v. Apurba Krishna Roy | Decision to the same effect as the other Appellate Side cases, allowing subsequent leave and refusing to follow Bodilly's strict rule. | The Court cited this case as further support for validating proceedings by subsequent leave and refused to feel bound by Mr. Justice Bodilly's decision. |
| Aston v. Heron | English authority cited (through Kerr on Receiver and Halsbury) supportive of the Court's approach that subsequent validation may be permissible. | The presiding Judge quoted these English authorities (as reported in secondary sources) as consistent with his conclusion, noting he had not personally inspected the original reports. |
| Gowar v. Bennett | Another English authority cited (via text-books) to similar effect as Aston v. Heron. | Used by the Court as supporting material drawn from secondary sources; the Judge treated these English authorities as consistent with allowing subsequent leave in appropriate cases. |
Court's Reasoning and Analysis
The Court identified two discrete questions (continuation of the suit after leave obtained subsequently; and entitlement to possession of the vessel). The first question turned on the legal effect of commencing proceedings without prior leave of the appointing Court and whether subsequent leave cures that defect.
The Court considered conflicting authorities. It acknowledged the decision in Pramatha Nath Ganguly v. Khetter Nath Banerjee (Mr. Justice Bodilly) which held that prior consent is a condition precedent and cannot be cured by subsequent permission. The Court also noted decisions on the Appellate Side (Banku Behari Dey v. Harendra Nath Muherjee; Sarat Chandra Banerjee v. Apurba Krishna Roy; The Maharajah of Burdwan v. Apurba Krishna Roy) which refused to follow Bodilly and took the view that the Court can, at any time, subsequently give leave to sue the Receiver and thus validate proceedings that were initiated without prior leave.
Respecting the conflicting authorities, the presiding Judge stated he was not bound by Mr. Justice Bodilly's decision and was free to express his own view. He agreed with the Appellate Side cases that the appointing Court may subsequently consider whether the suit is for the benefit of the estate and, if so satisfied, may validate the proceedings by granting subsequent leave. The Judge emphasised that the Court will protect its officer (the Receiver) and may stay proceedings or impose penalties for interference, but that dismissal is not the only or necessary outcome where subsequent leave is appropriate.
Applying that principle to the facts, the Court concluded that the defect arising from Mr. Sethna's commencement of the suit without prior leave was cured by the Bombay Court's order dated 15 May authorising him to continue the present suit. The Court noted that on 13 May (before the Bombay leave was produced) the suit was incompetent and that had the Court dealt with the application on that date it would have stayed proceedings rather than dismissed the suit.
On the second issue (possession), the Court observed that Mr. Sethna's appointment and his actions to take possession predated the appointment of the Official Receiver of this Court. The Court considered it undesirable for two Receivers to remain in possession. Balancing interests, the Court sought a practical solution to protect the interest of the Defendant Gaebele while recognising the priority and diligence of Mr. Sethna.
The Court therefore fashioned a conditional order: if Mr. Sethna undertakes not to part with the vessel or any sale proceeds (if he sells) for one month from the date of the order, then the Official Receiver of this Court is to withdraw from possession. This condition was intended to give Defendant Gaebele time to apply to be added as a party in the Bombay suit or to seek appropriate orders in that forum; the Judge regarded the Bombay Court as the proper tribunal to resolve competing rights concerning the vessel.
Holding and Implications
Core Ruling: The Court held that the initial defect in commencing the suit without prior leave was cured by the subsequent leave obtained from the appointing Bombay Court on 15th May, and consequently the objection to the continuation of the suit on that ground fails.
Disposition regarding possession: The Court ordered a conditional withdrawal of the Official Receiver of this Court from possession of the vessel on the undertaking by Mr. Sethna that he will not part with the vessel or its sale proceeds for one month from the date of the order. This arrangement permits Defendant Gaebele a month to seek relief in the Bombay suit or to apply to be added as a party in that suit or to seek Mr. Sethna's appointment as Receiver in Suit No. 519 of this Court.
Consequences and implications:
- The immediate legal effect is that Mr. Sethna is permitted to continue the proceedings because of the subsequent leave granted on 15 May; the first point made against the application (that the suit was fatally defective for want of prior leave) failed.
- The practical effect is a conditional transfer of possession: the Official Receiver of this Court will withdraw from possession provided Mr. Sethna gives the specified undertaking for one month.
- The Court expressed its preference that the Bombay Court (the appointing Court) is the appropriate forum to resolve competing claims affecting the vessel and permitted a procedural mechanism (time-limited undertaking) to enable parties to pursue remedies there.
- The opinion records the Judge's disagreement with Mr. Justice Bodilly's strict rule and his alignment with the Appellate-side authorities and cited English authorities (as reported in textbooks) as consistent with the approach that subsequent leave may validate proceedings; the decision thus adopts and applies that approach to the facts before it.
This summary is limited strictly to information appearing in the provided opinion and does not add external facts or infer matters beyond the text.
The Judgment of the Court was as follows:—
On the 9th May last I granted a rule at the instance of the Plaintiff, who is the Official Receiver of the Bombay High Court, calling on the Defendants to show cause why the Plaintiff should not take possession of a schooner called the “Rahia Khatoon” at present lying in the Hooghly within the jurisdiction of this Court and why the Defendant Krishna Shelly Bonnerjee, the Official Receiver of this Court, should not give up possession of the said vessel. The Defendants now appear to show cause against this rule.
On the 17th April 1918 a firm of Binoderam Balchand commenced a suit on the Original Side of the High Court of Bombay against J.A Grant & Co., asking (inter alia) for a declaration that two sums of Rs. 1,71,644-10-6 and Rs. 1,36,763-4-9 were due to them from the Defendants, for payment to them of these sums and interest thereon at 9 per cent per annum from the date of the suit until payment, and for a declaration that the repayment of these sums was validly charged on the “Rabia Khatoon.” They also asked for the appointment of a Receiver.
They claim a charge on the said vessel by virtue of a document of charge dated the 21st February 1916 executed in their favour by J.A Grant & Co.
On the 30th April 1918 the Plaintiff before me was appointed in the Bombay Suit Receiver to take charge of the sailing ship “Rabia Khatoon” and otherwise to recover the freight and other profits to be earned by the employment of the “Rabia Khatoon’; the order directs the Receiver to pass his accounts but does not directly authorise him to sue. It appears that the attorneys of Messrs Binoderam Balchand telegraphed to the Captain of the “Rabia Khatoon” at Spence's Hotel, Calcutta, on the 1st May informing him of the appointment of Mr. Sethna as Receiver in the Bombay Suit.
It appears from the affidavit of one Ali Mahomed Rajabali Lakhdhir, filed in this suit on the 9th May, that he came to Calcutta under Mr. Sethna's orders on the 4th May and took formal charge of the vessel on that day.
Upon the 3rd May in Suit No. 519 of 1918 instituted in this Court on the 26th of April, by one Frederik Gaebele, who is described as ordinarily residing in Pondicherry, but then residing at Spence's Hotel, Calcutta, carrying on business at Pondicharry under the style of Frederik Gaebele & Co against J.A Grant & Co., carrying on business in Bombay, I, at the instance of the Plaintiff in Suit No. 519 of 1918, appointed the Official Receiver of this Court interim, Receiver of the “Rabia Ivhatoon,” and on the 10th May the appointment was continued until the hearing of that suit.
Counsel for the Plaintiff in the suit now before me desired to raise the question of my jurisdiction to make the order and as to whether the Defendants J.A Grant & Co. had been served with the rule upon which the Receiver was appointed; but I declined to go into those questions in this suit. The Plaintiff in Suit No. 519 of 1918 claims from the Defendants a sum of Rs. 50,000 and interest and claims to be entitled to a charge in respect thereof on the “Rabia Khatoon” by virtue of clause in a charter party dated the 6th March 1918 and entered into in Bombay between the Plaintiff and the Defendants in respect of the “Rabia Khatoon.” The charter party provides that the charterers (that is the Plaintiff in Suit No. 519 of 1918) are to have a lien on the vessel for all moneys paid in advance. The charter party was put an end to by mutual consent, but the Plaintiff claims to have advanced to the Defendants Rs. 50,000 upon the execution thereof and to have a lien on the vessel for this sum by virtue of the provisions in the charter party to which I have referred. He applied for a Receiver as the owners were trying to sell the vessel.
It appears that in pursuance of my order of the 3rd May made in Suit No. 519 of 1918 a representative of the Official Receiver went on board the “Rabia Khatoon” on the 3rd May and informed the Captain that he had taken charge of the vessel. The Captain states that he in formed him prior to this of the order of the Bombay High Court which had been intimated to him by telegram. Under these circumstances Mr. Sethna applied to this Court for leave to proceed against the Receiver of the “Rabia Khatoon” appointed by this Court, and leave being given he obtained this rule.
The rule should have come on for hearing on the 10th May, but it was not reached on that day and Monday the 13th May was fixed for the hearing. A preliminary objection was taken on that day on behalf of the Defendant Gaebele that Mr. Sethna had not obtained leave from the Court appointing him before instituting this suit and it was urged that this was a fatal defect which could not be cured by any leave subsequently obtained from the Bombay Court. No copy of the order appointing Mr. Sethna being available, I directed the rule to stand over until the 17th May for production of (a) the order appointing Mr. Sethna, (b) any order subsequently obtained prior to the institution of the suit. On the 17th May the rule again stood over as the orders had not been received from Bombay, and on the 20th May I heard the rule. On that day the order appointing Mr. Sethna, to the contents of which I have already referred, was produced, and also an order obtained by Mr. Sethna in the Bombay Suit No. 549 of 1918, dated the 15th May 1918, authorising him to continue the present suit.
Two questions accordingly arise on the present rule, namely:—
(1) Whether Mr. Sethna, having commenced this suit without the leave of the Bombay Court which appointed him, can continue the suit and these proceedings by virtue of the leave obtained by him to continue the proceedings by the order of the 15th May, or whether I should decline to entertain the application and should ultimately dismiss the suit.
(2) Whether, under the circumstances, if I decide that Mr. Sethna can continue the proceedings, I should allow him to take possession of the “Rabia Khatoon.”
So far as the first question is concerned, I am asked to say by Counsel for the Defendant Gaebele that the matter is concluded by authority, namely, by the decision of Mr. Justice Bodilly, in Pramatha Nath Ganguly v. Khetter Nath Banerjee , where, in a suit brought against a Receiver, he decided that the consent of the Court to sue a Receiver is a condition precedent to the right to sue and cannot be rectified by a subsequent application for permission to continue the action if it has been instituted without permission. That, of course, is a converse case to the present; but it is said that the same principle applies here.
In Miller v. Ram Ranjan Chakravarti a decree passed against a Receiver was set aside on appeal, no leave having been obtained to sue him, the Court holding that he could not be sued without the leave of the Court. In Dunne v. Kumar Chandra Kissore the decision in Miller v. Ram Ranjan Chakravarti is cited with approval, and it is stated that a Receiver can neither sue nor be sued without the leave of the Court.
In three cases decided on the Appellate Side of this Court, to all of which decisions Mr. Justice Mookerjee was a party, the Court has refused to follow the decision of Mr. Justice Bodilly in Pramatha Nath Ganguly v. Khetter Nath Banerjee . In Banku Behari Dey v. Harendra Nath Muherjee the Appellate Court stated that the lower Court instead of dismissing the suit against the Receiver should have stayed the proceedings to allow leave to be obtained to sue the Receiver. In Sarat Chandra Banerjee v. Apurba Krishna Roy the Appellate Court held that after execution proceedings had been commenced leave could be subsequently obtained to execute against a Receiver. The third case, The Maharajah Of Burdwan… v. Apurba Krishna Roy…Opposite Party. is to the same effect.
In this state of the authorities I do not think I should be bound by the decision of Mr. Justice Bodilly if I do not agree with it, assuming that it covers the point which I have to decide, and I think I am free to express my own view. This being so, I must say respectfully that I do not think that decision is correct and I agree with the views expressed in the three cases [Banku Behari Dey v. Harendra Nath Muherjee , Sarat Chandra v. Apurba Krishna and Maharajah of Burdwan v. Apurba Krishna ], namely, that it is open to the Court at any time, even if leave has not first been obtained, to subsequently give leave to sue the Receiver. There is no doubt that the Court will always jealously protect its officer in pursuance of his duties and punish any interference with him by staying proceedings commenced against him without leave and by other appropriate penalties; but I think that even so, a Court, if a proper case is made out to its satisfaciton, will subsequently allow the suit to continue and will not dismiss it.
I think, so far as I can ascertain, that this is in accordance with the English authorities, see Aston v. Heron and Gowar v. Bennett which I quote as an authority from the statements of the case made in Kerr on Receiver, 5th Ed., p. 181, p. 204 of the 6th Ed. and Halsbury's Laws of England, Vol. 24, p. 382, as I have not been able myself to see the case.
So far as the present case is concerned, I have found no authority in point where the action has been commenced by a Receiver without first having obtained leave from the Court appointing him. Of course the powers of a Receiver are derived from the Court which appoints him, and there certainly seems considerable force in the argument addressed to me that if, when he commences the suit, he is not empowered to do so by the appointing Court, it is beyond his powers and the defect cannot be cured by leave subsequently obtained; but on the whole I have come to the conclusion that it is open to the appointing Court under these circumstances to consider subsequently whether the suit is for the benefit of the estate, and if it is so satisfied, to validate the proceedings by subsequent leave. The result is that I think the original defect has been cured by the leave which Mr. Sethna obtained from the Bombay Court on the 15th May. On the 13th May the suit was incompetent, and if I had dealt with the present application on that day I should have stayed all proceedings in the suit, but I should not have dismissed the suit. The first point, therefore, made against this application fails.
So far as the second point is concerned, there is no doubt that Mr. Sethna's appointment was prior in date and he acted with due diligence in endeavouring to take possession of the “Rabia Khatoon”—The Bombay suit in which he was appointed is also prior in date to the suit in this Court in which the Official Receiver of this Court was appointed Receiver. It is manifestly undesirable that two Receivers should remain in possession; at the same time I think it is right that the Defendant Gaebele's interest should be protected, and the order I propose to make is, that if Mr. Sethna will undertake not to part with the vessel or the sale-proceeds, if he sells it, for one month from to-day, the Official Receiver of this Court is to withdraw from possession. This will enable the Defendant Gaebele to apply to be added as a party in the Bombay suit and get such order as he may be advised in that suit to protect his interests, or to apply to have Mr. Sethna appointed as Receiver in Suit No. 519 of 1918 of this Court. I think, however, that the Bombay Court is the proper tribunal to deal with the questions which arise between the parties.
Messrs Orr, Dignam & Co., Solicitors for the Plaintiff.
Mr. G.C Mandal, Solicitor for the Defendant F. Gaebele.
Mr. J.K Fox, Solicitor for the Defendant K.S Bonnerjee, Official Receiver.
M.N.K
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