- Bookmark
- Share
- CaseIQ
Sreedhar Chaudhury v. Nilmoni Chaudhury
Structured Summary of the Opinion
Factual and Procedural Background
This application was brought by Messrs Mugneeram Banger & Co. and Harsookdas Balkissendas seeking several orders in relation to collieries of the firm Chaudhury & Co. that were in the possession of Mr. R.N. Mitter, the receiver appointed in the present suit. The relief sought included: an enquiry into the applicants' interest in the collieries; directions that the receiver pay rents and receipts to the applicants; surrender of possession by the receiver; directions restraining certain payments being made from the mortgaged collieries' income; and other consequential reliefs.
Relevant procedural history in the opinion:
- On 21 August 1923 Harsookdas Balkissendas obtained a decree in suit No. 2239 of 1923 against the firm Chaudhury & Co. for Rs. 10,000 and applied for adjudication of the firm as insolvent.
- The present suit (filed July 1923) sought dissolution of partnership and partnership accounts; by consent order dated 17 July 1923 Mr. R.N. Mitter was appointed receiver of partnership assets, including colliery properties.
- A separate suit was instituted in the Subordinate Judge's Court at Dhanbad by Mugneeram Banger and others (to enforce a mortgage dated 22 January 1920); that suit was instituted on 14 August 1923 and an order appointing Mr. Mitter as receiver of the mortgaged premises was made on 15 September 1923.
- The Dhanbad receiver order was set aside on appeal by the Patna High Court on 7 January 1924 (reported 3 Pat 357 : 1924 Pat. 491).
- The applicants allege the receiver has applied large sums (including Rs. 1,41,054-5-0 specifically noted) to unsecured debts instead of paying mortgage interest and that between three and four lakhs have been paid to unsecured creditors.
- The receiver has, according to the opinion, instituted a suit in this Court seeking a declaration that the mortgage is no longer subsisting and alleging the mortgagees have been overpaid; that suit had been instituted over a year prior but no summons had been served or steps taken to prosecute it.
- The Court records displeasure at the receiver's conduct (including a specific letter of 15 January 1924) but accepted an apology offered through the receiver's counsel.
Legal Issues Presented
- Whether the applicants, as alleged mortgagees, should be allowed to be examined pro interesse suo (i.e., permitted to come in and have their title and claim to the mortgaged collieries investigated) in the suit where a receiver is in possession.
- Whether the receiver should be directed to pay rents and receipts of the mortgaged collieries to the applicants, to give up possession, and be restrained from making payments from the mortgaged properties to unsecured creditors or to specified persons.
- Whether the Court should exercise its discretion to grant the extraordinary remedy of examination pro interesse suo in the face of parallel or pending proceedings in other courts or proceedings already begun by the applicants.
Arguments of the Parties
Arguments advanced by Mr. Langford James (opposing the application)
- The Court has the power to order examination pro interesse suo, but it is a discretionary power that should not be exercised where the applicant has already instituted a suit or action to try the question of title.
- There is a pending suit in the Dhanbad Court to enforce the mortgage; the question of title will be determined there, so this application should be refused as superfluous or inappropriate.
Arguments advanced by Mr. Sircar (supporting the applicants)
- Given events (including payments by the receiver and the receiver's conduct), the mortgagees had no practical alternative but to apply in the present suit in which the receiver is in possession.
- The Court should not refuse an application for examination pro interesse suo unless it is perfectly clear that there is no foundation for the claim; the usual practice is to allow an applicant to be examined before the Master to state their title and obtain initial determination.
- Where the receiver is in possession under the Court's authority, the applicant must seek leave to have the receiver's possession disturbed, and the appropriate mode is an application to be examined pro interesse suo (citing established practice).
Conduct and defence of the receiver
- The receiver (Mr. R.N. Mitter) filed affidavits in opposition; his conduct in corresponding with creditors merited the Court's severe displeasure, but his counsel expressed regret and tendered an apology, which the Court accepted.
- The receiver had also instituted a suit in this Court seeking declarations adverse to the mortgagees, but that suit had not been proceeded with (no summons served), a fact drawn to the Court's attention by the applicants.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| 39 C.L.J. 512 : 1924 Cal. 964 | The Court's earlier judgment in the insolvency application that set out facts relevant to the present application. | Referred to as the judge's prior decision where the facts to which attention was drawn in the insolvency application are fully set out; serves as part of factual and procedural background. |
| 3 Pat 357 : 1924 Pat. 491 (Patna High Court) | Reported judgment setting aside the Subordinate Judge of Dhanbad's order appointing Mr. R.N. Mitter as receiver in the Dhanbad suit. | Used to show that the earlier appointment of the receiver in the Dhanbad suit had been set aside on appeal to the Patna High Court; factual antecedent in considering jurisdictional and procedural posture. |
| Searle v. Choat | Authority referenced for the practice that the proper mode for an adverse claimant is to apply to be permitted to be examined pro interesse suo. | Invoked to support the description of the established practice (applicant going before the Master to state title and obtain preliminary judgment). |
| Angel v. Smith | Referenced among authorities explaining that where the question is a pure matter of title the Court will generally authorise a suit to be brought while protecting possession. | Relied on as part of the established English practice that title disputes are normally tried by suit, with directions to protect possession when a receiver is in office. |
| Brooks v. Greathed | Contains the principle (quoted from Plumer M.R.) that one should not obtain by petition what has been sought by another remedy (i.e., a party should not get by petition what he had sought by suit). | Applied directly by the Court to hold that the applicants, having begun proceedings in Dhanbad, could not now seek identical relief by petition in this suit; cited as a main reason for refusal. |
| Bryan v. Cormick | Listed among authorities illustrating the practice of leaving pure title questions to suits while protecting possession. | Used as part of the group of English authorities supporting the described practice; no distinct separate application beyond that grouping in the opinion. |
| Hayes v. Hayes | Included in the list of cases exemplifying the practice noted above. | Used as an illustrative authority in the Court's discussion of practice; no specific separate rule extracted in the opinion beyond its inclusion. |
| Empringham v. Short | Included among the cases cited for the general practice regarding applications pro interesse suo and title disputes. | Referred to as part of the body of authorities supporting the proposition that pure title questions are generally resolved by suit with possession protected by Court directions. |
| Evelyn v. Lewis | Included in the group of English authorities cited on practice surrounding examination pro interesse suo and title litigation. | Used illustratively as part of the established practice; not separately applied beyond that context in the opinion. |
| Motivahu v. Premvahu | Cited for the proposition that orders for examination pro interesse suo have been made from early times but are exercised sparingly and only in special cases/conditions. | Relied upon to support the Court's statement that although the power exists, it will be exercised cautiously and only in special circumstances. |
| Mahomed v. Zoharra | Also cited to show that the Court's power to make such orders is historically recognised but sparingly exercised. | Used similarly to Motivahu v. Premvahu to underline the limited and exceptional nature of the remedy. |
Court's Reasoning and Analysis
The Court undertook a focused analysis balancing the applicants' asserted rights as mortgagees against procedural regularity and the discretionary nature of the remedy they sought. The Court's step-by-step reasoning, confined to the content of the opinion, is as follows:
- Acknowledgement of power: The Court recognised that it possesses the power to permit examination pro interesse suo and that historically such orders have been made, but only sparingly and under special conditions (citing authorities to that effect).
- Consideration of competing proceedings and prior remedies: The Court noted there was an active suit in the Dhanbad Court where the mortgagees had already sought enforcement of their mortgage, and there was also a suit instituted in this Court by the receiver against the applicants (for a declaration that the mortgage is no longer subsisting), which had not been prosecuted to service of summons. These parallel proceedings weighed against permitting the present petition.
- Discretion and diligence: The Court emphasised that an examination pro interesse suo is an equitable and discretionary remedy which is not granted where the applicant has not shown diligence. The applicants had previously commenced proceedings in the Dhanbad Court and therefore could not be permitted to abandon that remedy and obtain the same relief by petition in this suit. The Court invoked Brooks v. Greathed to underscore that a petitioner should not obtain by petition what he has sought by another remedy.
- Weighing conduct of the receiver: While the Court severely censured the receiver for improper correspondence and conduct (accepting an apology but noting misconduct), that misconduct did not by itself justify granting the extraordinary relief sought in the face of the procedural defects identified.
- Conditional assistance despite refusal: Although the application was refused, the Court exercised its supervisory duty to protect the interests of the mortgagees by imposing two directions on the receiver: (a) to take immediate steps to bring his suit in this Court against the applicants to a hearing, and (b) not to pay out any moneys out of the estate in his possession without obtaining the Court's prior order (with Registrar communications permitted to obtain such orders and an express instruction to avoid incurring costs by making applications in Court).
- Costs: Having regard to the peculiar circumstances, the Court made no order as to costs.
Holding and Implications
Holding: Application refused.
Direct, case-specific consequences stated in the opinion:
- The application by Messrs Mugneeram Banger & Co. and Harsookdas Balkissendas for examination pro interesse suo and related directions was refused by the Court.
- The Court directed that the receiver must immediately take steps to bring the suit which he had instituted in this Court against the applicants to a hearing.
- The receiver was ordered not to pay out any moneys from the estate in his possession without previously obtaining the Court's order; such procedural orders may be obtained by communications to the Registrar, and the receiver must avoid incurring costs by bringing formal applications in Court.
- The Court made no order as to costs in the present matter.
Implications as expressed in the opinion:
- The decision refuses to grant the extraordinary remedy sought because of concurrent proceedings and lack of diligence by the applicants; it enforces the principle that petition remedies will not be used to obtain what the applicant has already sought by another remedy.
- The Court did not purport to establish any novel legal principle; it reiterated the limited and discretionary nature of examination pro interesse suo and applied established practice and precedent to the facts of the case.
Note: This summary is strictly confined to the matters and reasoning contained within the provided opinion and does not add facts or legal inferences beyond what the opinion itself states.
1. This is an application on behalf of Messrs Mugneeram Banger & Co. and Harsookdas Balkissendas for an order (1) that an enquiry may be made as to whether the applicants have any and what interest in the collieries taken possession of by Mr. R.N Mitter, the receiver appointed in this suit, (2) for a direction on the receiver to pay rents and receipts from the said collieries to the applicants or for such other direction as to this Court may seem fit and proper, (3) that the said receiver do give up possession of the said collieries, (4) for a direction on the receiver to stop the monthly payment of Rs. 500 to himself and Rs. 500 for establishment charges and Rs. 3000 to Sreedhar Chaudhury and Nilmoni Chaudhury out of any income of the collieries mortgaged to the applicants and making any payments out of the income of the mortgaged collieries to the creditors of Chaudhury & Co. and Sreedhar Chaudhury, and (5) for such other orders as to this Court may seem fit.
2. The facts which have given rise to the present application, shortly stated, are as follows:—Messrs Harsookdas Balkissendas who obtained on the 21st August, 1923, a decree in suit No. 2239 of 1923 against the firm of Messrs Chaudhury & Co., in which the parties herein are partners, for a sum of Rs. 10,000 made an application to this Court for an order that the firm of Messrs Chaudhury & Co., might be adjudicated as insolvents.
3. That application came on before me and was disposed of by me on the 9th May, 1924. There was an appeal against my judgment, but the same was dismissed. My judgment is reported in 39 C.L.J 512 : 1924 Cal. 964 wherein I have set out fully the facts to which my attention was drawn in the said application in insolvency. It is alleged that with the object of using the property of the firm of Chaudhury & Co. in such a manner as it suited the firm and with the object of delaying and defrauding the creditors of the firm, the parties herein formed a scheme of instituting a collusive suit and of having a nominee of their own appointed as receiver and although unable to pay their just debts, of using the income of the collieries belonging to the firm for their own purposes. The suit referred to is the present suit which was filed in July, 1923, for dissolution of partnership and for, partnership accounts. By an order by consent which was passed on the 17th July, 1923, Mr. R.N Mitter, Barrister-at-Law, and an Advocate of this Court, was appointed receiver of the partnership assets, which included certain colliery properties. In passing, it may be noticed that the said colliery properties are at present the subject matter of a suit instituted in the Court of the Subordinate Judge of Dhanbad in Bihar by one Mugneeram Banger and others, the same being a suit to enforce a mortgage of the said colliery properties, executed by Nilmoni Chaudhury on the 22nd January, 1920. The said suit in the Dhanbad Court was instituted on the 14th August, 1923, and an order was made by the Subordinate Judge of Dhanbad, on the 15th September, 1923, by which the said Mr. R.N Mitter was appointed receiver of the mortgaged premises. The mortgagors being dissatisfied with the last mentioned order, appealed to the Patna High Court and by their judgment delivered on the 7th January, 1924, Das and Ross, JJ. allowed the appeal and set-aside the order of the Subordinate Judge, appointing Mr. R.N Mitter as receiver in the Dhanbad suit of the mortgaged premises. The judgment of their Lordships of the High Court is reported in 3 Pat 357 : 1924 Pat. 491 where the facts of the Dhanbad suit are set out. It is alleged that the receiver has, instead of paying the interest due on the mortgage of the colliery properties, paid a sum of Rs. 1,41,054-5-0 in satisfaction of certain alleged debts and liabilities of Messrs Chaudhury & Co. and attention is drawn to the fact that it was stated in the Court of appeal on the 27th June, 1924, that large sums of money amounting in all to between three and four lacs have been paid by the said receiver to various unsecured creditors. The present applicants contended that as mortgagees of the said colliery properties they have a title paramount to that of the persons who procured the appointment of the receiver and that they are entitled to be examined pro interesse suo and to establish their claim as mortgagees and to have the rents, issues and profits of the mortgaged properties already received and to be received by Mr. Mitter as receiver, applied in satisfaction of the incumbrances held by them. The applicants further urge that in any event the receiver should be restraired from paying the profits of the said mortgaged properties to unsecured creditors or to creditors who have no priority over the applicants as mortgagees. Attention is also drawn by the applicant to the conduct of the receiver in giving personal undertaking to tradesmen and money-lenders and it is suggested that to further the scheme, to effectuate which the present suit has been brought, the receiver has set up a contention that the present applicants are merely unsecured creditors and has brought a suit in this Court against the applicants praying for a declaration that the mortgage of the said colliery properties is no longer subsisting and that the mortgagees had been overpaid. I am informed that the last mentioned suit was instituted more than a year ago, but that no summons has yet been served, nor have any steps been taken in the said suit, notwithstanding demands for service of summons. In opposition to the present application there have been used before vat the affidavits of Nilmoni Chaudhury and Mr. R.N Mitter. I desire to say ab once that there was no justification whatsoever on the part of the receiver to write the letter of the 15th January, 1924, which is referred to in the affidavit of Kissengopal Bagree and that the receiver has by his conduct merited the severe displeasure of the Court. It is intolerable that a receiver of this Court should so far forget himself as to write letters to creditors of the firm of Chaudhury & Co., in the manner in which he has done. The receiver has through his counsel expressed his regret and after some hesitation I have decided to accept his apology.
4. On the merits of the present application and also on the question whether such an application in lie, I have heard an elaborate argument from Mr. Langford James. He has argued that although there is power in the Court to make an order for examination pro interesse suo Court has a discretion in the matter and will never exercise that discretion in favour of the applicant where the applicant himself has instituted a suit or action to try the question of title. He points out that there is a suit to enforce the mortgage pending in the Court of the Subordinate Judge at Dhanbad; no doubt a contention has been raised that the mortgage has been paid off, but in any event the question of title will have to be gone into in the Dhanbad Court and it is therefore argued that this Court on the present application will refuse to make an, order, such as has been prayed for. Mr. Sircar, who appeared in support of the application has argued that having regard to the events which had happened, the mortgagees have had no other alternative but to make the present application in the present suit in which a receiver has been appointed, and that the Court will mot make an order refusing to examine the applicants pro interesse suo unless it is perfectly clear that there is no foundation for the claim. No doubt, when a receiver is in possession of property under the process or authority of the Court, his possession is not to be disturbed even by an ejectment under an adverse title without; the leave of the Court, for the receiver's possession is deemed the possession of the Court and the Court will not permit itself to be made a suitor in a Court of law. The proper and usual mode adopted under such circumstances is far the party claiming an adverse interest to apply to the Court to be permitted to come in and be examined pro interesse suo [See in this connection Searle v. Choat(1)]. The practice in England is to allow the applicant to go before the Master and to state his title upon which he may in the first instance have the judgment of the Master and ultimately, if necessary, that of the Court, but where the question to be tried is a pure matter of title, the Court from a sense of convenience and justice will generally authorise a suit to be brought, taking care, however, to protect the possession by giving proper directions (See Angel v. Smith(2); Brooks v. Greathed(3); Bryan v. Cormick(4); Hayes v. Hayes(5); Empringham v. Short(6); Evelyn v. Lewis(7)]. But what are the facts in the present case? Soon after the institution of the present unit the mortgage went to the Dhanbad Court to enforce their mortgage, as they were entitled to do. They made an application in the Dhanbad Court for the appointment of a receiver of the mortgaged premises and they obtained an order for the appointment of a receiver. That Order, however, was subsequently set aside on appeal by Patna High Court. Then there were the insolvency proceedings in this Court, to which I have referred. Then followed the present application. I should have been glad to assist the mortgagees who claim a title paramount by making an order for their examination pro interesse suo, but for the reasons about to be given I must refuse the present application. My reasons are two in number. In the first place, there is the suit in the Dhanbad Court, where the mortgagees' rights will have to be established, and there is also suit in this Court instituted by the receiver in which no summons has yet been served; and in the second place, an examination pro interesse suo is never made unless the applicant shows diligence, and in this case the applicants have not shown diligence. The applicants cannot be allowed now to come into this suit by petition for examination pro interesse suo laying by the suit which they had begun in the Dhanbad Court to obtain the same relief. As the Master of the Rolls (Plumer M.R) said in Brooks v. Greathed, “it would not be consistent to give to the applicants that on petition, which they had themselves sought by another remedy”. The conclusion, therefore, to which I have regretfully come, on the facts of this case, is that I must refuse the present application. As I have said, there is undoubted power in the Court to make such an order, as has been asked for; such orders have been made from very early times, although it is perfectly true that the Court has exercised the power very sparingly and only in very special cases and under special conditions [See Motivahu v. Premvahu(8); Mahomed v. Zoharra(9)]. But although I refuse the present application, I am prepared to assist the applicants as far as it lies in my power and I propose to do that in this way, viz., that I direct the receiver to take immediate steps to bring the suit which he has instituted in this Court against the applicants to a hearing, and, secondly, the receiver must not pay out any moneys out of the estate in his possession without my order having been previously obtained. The receiver can obtain such orders by means of communications addressed to the Registrar of the Court; he is not to incur costs by making applications in Court. Having regard to the peculiar circumstances of this case, I shall make no order as to costs.
5. Application refused.
Alert