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Jotindra Nath Chowdhury And Anr. v. Sarfaraj Mia And Others
Structured Summary of the Opinion
Factual and Procedural Background
The dispute concerns the right of a landlord (Plaintiffs-Appellants) to recover rent from tenants after a Receiver had been appointed over the property that was subject to a first charge for the arrears. The material facts and procedural history set out in the opinion are as follows:
- One Haniff Miah held a putni under the Plaintiffs-Appellants created by instrument dated 21 November 1882. Haniff died in 1907.
- Haniff left eight heirs who were joined as Defendants in the present suit.
- On 25 June 1908 the Plaintiffs commenced the action for recovery of rents due from April 1905 to April 1908 and sought the appointment of a Receiver pendente lite.
- A partition suit between members of Haniff's family was pending on the Original Side of the Court, and in that suit a Receiver was appointed on 17 August 1908 in respect of the entire estate of Haniff, including the defaulting tenure.
- Defendants in the present action informed the Court that a Receiver had been appointed and should be joined as a party. The Plaintiffs, after time to consider, declined to make the Receiver a Defendant (with leave of the Court in Original Jurisdiction).
- The Court of first instance held that the Receiver, having furnished security (Rs. 50,000 on 29 August 1908) and taken possession, was a proper and necessary party; consequently the Court dismissed the suit. The District Judge affirmed that decree.
- The Plaintiffs appealed to the present Court, arguing the Receiver was not a necessary party.
Legal Issues Presented
- Whether a landlord can maintain an action for rent of a permanent tenure against tenants after a Receiver is appointed by a Court of competent jurisdiction in respect of the property over which the rent in arrears constitutes a first charge.
- Whether a Receiver, appointed over the property, is a necessary or proper party to such an action (and whether the landlord must first obtain leave of the Court by which the Receiver was appointed to proceed).
Arguments of the Parties
Appellants' Arguments
- The Appellants contended that the Receiver was not a necessary party to the present litigation.
- The Appellants' Vakil suggested that if the Receiver was a necessary party, the Court should have ordered his joinder under section 32 of the Code of 1882 (corresponding to Order 1, Rule 10, sub-rule 2 of the Code of 1908).
- The Appellants also suggested that obtaining leave of the Court which appointed the Receiver could not have been obtained without delay.
Respondents' / Defendants' Position (as reflected in the opinion)
- The Defendants intimated to the Court that the Receiver who had been appointed in the partition suit should be joined as a party to the present action.
- The Courts below held that because the Receiver had furnished security, taken possession of the defaulting tenure, and the Plaintiffs sought both a decree for arrears and appointment of a Receiver, the Receiver was a proper and necessary party; accordingly the suit was dismissed.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Noe v. Gibson (Chancellor Walworth) | If a Receiver is appointed, courts should not tolerate attempts to deprive the Receiver of possession by suit or other proceeding without permission; necessity of leave to interfere with custody of Receiver. | Used to support the proposition that a landlord must obtain leave of the Court which appointed the Receiver before pursuing remedies that would affect property in the Receiver's custody. |
| Martin v. Black | Same effect as Noe v. Gibson regarding protection of Receiver's possession and necessity of leave. | Reinforces rule that proceedings affecting property in a Receiver's custody require leave of the appointing Court. |
| Gooch v. Haworth | Where property is in possession of a Receiver, if a landlord wishes to distrain for rent, Court may allow distress if landlord's legal right of distress is paramount. | Shows narrow circumstances where a landlord's remedy may be permitted despite a Receiver's custody, but overall supports cautious approach and necessity to involve Receiver/Court. |
| In re Battersheg | If leave is asked by landlord to commence action for recovery of possession for non-payment of rent, Court will be slow to interfere with landlord's rights and impose only necessary conditions. | Used to explain that Courts balance landlord rights and estate protection when receiver is involved; leave may be granted with conditions. |
| Sutton v. Rees | Supports principle that Receiver ought to be made party where property is affected by litigation. | Added weight to the general rule protecting property in custody of Receiver. |
| Eyton v. Denbigh | Similar support for preserving custody of property in Receiver's hands and requiring appropriate procedural steps to affect it. | Used as an additional authority for requiring Receiver's joinder or leave of appointing Court. |
| Searle v. Choat | Receiver is not liable to suit except in Court of which he is an officer; actions affecting property in Receiver's custody require leave. | Supports general rule preventing suits against Receiver in other Courts without leave. |
| Angel v. Smith | Receiver's protection from being sued except with leave of appointing Court. | Reinforces the proposition that claims against property in custodia legis must be pursued with appointing Court's permission. |
| Porter v. Savin | Same general proposition regarding Receiver and leave to sue. | Applied to show consistency of rule across authorities. |
| Miller v. Ram Ranjan and Barton v. Barbour | Authorities pointing to necessity of appropriate procedure where Receiver is concerned. | Combined with other cases to support the Court's ruling on joinder and leave. |
| Ashton v. Madhab Mom and Hem Chunder v. Prankristo | Rule that sale in execution of decree affecting property in Receiver's hands without notice to Receiver is liable to cancellation. | Cited to illustrate that decrees affecting property in Receiver's custody require notice to Receiver or may be set aside in execution. |
| Jogendra Nath v. Debendra Nath | Not followed on Original Side in that case (noted as exception to the above). | Court mentions it as an instance where the rule was not followed on the Original Side; used to show judicial treatment has variances. |
| Janki Koer v. Sham Shivendra | Receiver in mortgage suit is not necessary party to suit for purely personal claim against mortgagor; but where suit enforces lien against specific property in which Receiver is interested, he must be made a party. | Illustrates distinction between personal claims (no joinder needed) and claims affecting specific property (joinder required). |
| Demy v. Cole | Receiver represents rights of parties in actions affecting the property and is entitled to notice in all such cases. | Supports the proposition that Receiver should be made party to suits that affect property in his custody. |
| Flynn v. Faith | Receiver is proper and necessary party and should be joined along with parties primarily liable; Receiver should not be sued alone. | Used to explain that Receiver is joined in addition to, not in substitution for, primary parties. |
| Henning v. Raymond | Title to property for purposes of administration is in the Court; Receiver is the Court's right arm and entitled to representation in suits affecting custodia legis. | Emphasized the institutional reason for involving the Receiver in litigation affecting property under his charge. |
| Jaggat Tarini v. Naba Gopal | Support for Receiver's entitlement to be represented in suits affecting property in custodia legis. | Used as authority reiterating the Receiver's representative role and right to notice. |
| American Bank v. Me. Gettigan (notes) | Noted in relation to the principle that Receiver should be joined along with parties primarily liable. | Supplementary authority cited in support of joinder practice. |
Court's Reasoning and Analysis
The Court proceeded by examining the nature and effect of the appointment of a Receiver and how that appointment interacts with a landlord's remedies. Its reasoning, as stated in the opinion, can be summarized in the sequential legal steps below:
- The Plaintiffs' suit sought not only a decree for arrears of rent but also the appointment of a Receiver pendente lite. Because of this scope, any successful decree might lead to sale of the property which would affect the property in the custody of the Receiver appointed by another Court.
- The appointment of a Receiver does not, by itself, bar creditors from pursuing legal remedies; however, it limits them insofar as no decree in another Court can disturb the custody of the Receiver or be satisfied from property in the Receiver's hands except through the administering assistance of the Court appointing the Receiver.
- Therefore, when property is in the custody of a Receiver, a landlord who wishes to enforce a charge upon that property must proceed against the Receiver or obtain leave from the Court which appointed the Receiver. The proper course is to apply to the appointing Court for an order that the Receiver pay the rent or that the landlord be allowed to enforce rights according to law.
- The Court relied on multiple authorities (for example Noe v. Gibson, Martin v. Black, Gooch v. Haworth, In re Battersheg, and others) to establish the rule that suits affecting property in custodia legis require the Receiver's involvement or permission of the appointing Court. The institutional reasons were stressed: to protect the estate from unnecessary litigation, preserve it for all interested parties, and keep it under the appointing Court's control.
- The Court acknowledged a distinction: a Receiver need not be joined where a suit seeks to enforce purely personal claims against a party (citing Janki Koer v. Sham Shivendra). But where the suit seeks to enforce a lien or other right against specific property in the Receiver's custody, the Receiver must be made a party.
- The Court found that in the present case the Receiver had furnished security and taken possession, the Plaintiffs' claim could affect the property in the Receiver's custody, and thus the Receiver ought to have been joined as a party Defendant.
- Addressing procedural objections raised by the Appellants: the Court rejected the suggestion that it should have added the Receiver under section 32 of the Code of 1882, because the Plaintiffs were deliberately in default and the Court was not obliged to assist them in that manner. The Court also rejected the contention that obtaining leave of the appointing Court would necessarily have caused undue delay, calling that an "idle excuse" and noting the suit had been pending nearly two years.
- The Court observed that if the Receiver had been informed of the Plaintiffs' claim and found it just, he might have satisfied it from assets in his hands; thus the Plaintiffs' failure to act earlier was attributed to their own obstinacy.
- Because the objection to joinder had some novelty and because a fresh suit might be barred by limitation for a portion of the claim, the Court exercised discretion to afford the Plaintiffs an opportunity to correct the defect — but only by way of indulgence and upon payment of costs to the Defendants.
Holding and Implications
The Court's core conclusions and the practical consequences stated in the opinion are these:
The Court held that the Receiver was a proper and necessary party to the suit because the Plaintiffs' claim could affect property lawfully in the Receiver's custody. In addition, the Court declined to add the Receiver of its own motion under section 32 (Order 1, Rule 10, sub-rule 2 equivalent) because the Plaintiffs were found to be in deliberate default.
The specific directions and implications set out by the Court are as follows:
- The view of the law taken by the Courts below is correct.
- The Court directed that if the Plaintiffs deposit in this Court within one month the costs incurred by the Defendants (in this Court and in the Court of the District Judge), then the appeal shall be allowed, the decrees of the Courts below be set aside, and the suit remanded to the Court of first instance so that the Plaintiffs may take steps to have the Receiver added as a party Defendant.
- If the costs are not deposited within the time allowed, the decree of the District Judge will stand confirmed and the appeal will be dismissed with costs.
- Appeal dismissed.
Note: The opinion sets out a conditional pathway by which the Plaintiffs could have the appeal allowed (by payment of costs within a specified time), but the final line of the opinion records "Appeal dismissed." The Court made clear that no new rule displacing the protection afforded to property in the custody of a Receiver was being established; the practical effect is that suits affecting such property must involve the Receiver or obtain leave of the appointing Court, and failure to do so may result in dismissal unless procedural defects are remedied as directed.
The question of law which has been argued on this appeal, is apparently one of first impression, so far as the Courts of this country are concerned, and relates to the right of a landlord to maintain an action for rent of a permanent tenure against his tenants, after a Receiver has been appointed by a Court of competent jurisdiction in respect of the property over which the rent in arrears constitutes a first charge. The circumstances under which this question arises for decision are not the subject of controversy between the parties. One Haniff Miah held a putni under the Plaintiffs-Appellants, created by an instrument dated the 21st November 1882. Haniff died in 1907 and left as his heirs the eight persons who have been joined as Defendants to this suit. On the 25th June 1908 the Plaintiffs commenced the present action for recovery of the rents due from April 1905 to April 1908. The Plaintiffs further prayed that a Receiver might be appointed to take charge of the defaulting tenure during the pendency of the litigation. Meanwhile, disputes had broken out amongst the members of the family of Haniff, and a suit for partition of the estate left by him had been commenced on the Original Side of this Court. In that suit a Receiver was appointed on the 17th August 1908 in respect of the entire estate of Haniff, inclusive of the defaulting tenure. The Defendants in the present litigation thereupon intimated to the Court that the Receiver had been appointed and should be joined as a party Defendant. The Plaintiffs took time to consider their position, and ultimately declined to make the Receiver a Defendant in the suit with the leave of this Court in the exercise of its Original Jurisdiction. The Court of first instance thereupon held that as the Receiver had furnished a security to the extent of Rs. 50,000 on the 29th August 1908, and had taken possession of the defaulting tenure, he was a proper as well as a necessary party to the suit, because the Plaintiffs not only asked for the appointment of a Receiver in their suit, but would also be entitled in execution of any decree made in their favour to enforce the same by sale of the defaulting tenure which was in the custody of the Court. In this view, he dismissed the suit. Upon appeal the District Judge affirmed this decree. The Plaintiffs have now appealed to this Court, and on their behalf, it has been argued that the Receiver is not a necessary party to the present litigation. In our opinion, this contention must be overruled in view of the scope of the suit and the effect of any decree therein that may be made in favour of the Plaintiffs.
As has been already observed, the Plaintiffs ask not merely for a decree of arrears of rent, but also for the appointment of a Receiver pendente lite. It cannot be disputed, further, that if the Plaintiffs are successful in the suit, they will be entitled to bring the property to sale, and the purchaser will take it free from all incumbrances. Under such circumstances, the Plaintiffs, as soon as they are apprised of the appointment of the Receiver by this Court, were, in our opinion, bound to make him a party to the suit, and to afford him an opportunity to resist their claim for the enforcement of what constitutes a first charge upon the property in his hands. It may be conceded that the appointment of a Receiver does not, of itself, debar a creditor of the person over whose estate the Receiver is appointed, from pursuing his legal remedy by action against such debtor, or from bringing a suit for relief touching the same property, provided such suit does not in any way interfere with the possession or jurisdiction of the Court by which the Receiver was appointed. The reason for the limitation, is obvious, because no decree or judgment in such a suit can operate to disturb the custody of the Receiver, or be satisfied from the property in the hands of the Receiver, except through the administering assistance of the Court appointing him. The position, therefore, is that the appointment of a Receiver does not affect the rights of a landlord, but before he can exercise them effectively, he has to proceed against the Receiver, and for this purpose he must first obtain leave of the Court by which the Receiver was appointed. The proper course for the landlord, under such circumstances, is to apply to the Court by which the Receiver has been appointed, for an order that the Receiver do pay the rent, or that the landlord be at liberty to proceed to enforce his rights according to law. The principle applicable to cases of this description was examined by Chancellor Walworth in Noe v. Gibson(1), and it was pointed out that if the contrary view were taken rightful possession of the property by the Receiver might ultimately be interfered with, and no Court should tolerate a contempt of its authority by an attempt to deprive the Receiver of possession by force, or even by a suit or other proceeding against him, without permission duly obtained. To the same effect is the decision in Martin v. Black(2). A similar point arose for consideration in the cases of Gooch v. Haworth(3) and In re Battersheg(4). In the first of these cases, it was ruled that where a landlord wishes to distrain for rent of property in possession of the Receiver, the Court if satisfied that the legal right of distress was paramount to the title of the party for whose benefit the Receiver was appointed, would allow the distress to be made. In the second case, it was ruled that if leave is asked by a landlord to commence action for recovery of possession for non-payment of rent, the Court in disposing of such application, will be slow to interfere with the rights of the landlord, and will only impose conditions, when necessary, for the benefit of the estate, and not likely to occasion the landlord any appreciable injury. To the same effect are the decisions in Sutton v. Rees(5) and Eyton v. Denbigh(6). These cases make it obvious that if the property is intended to be affected by the result of litigation, the Receiver ought to be made a party to the suit by the landlord, and for this purpose, leave of the Court by which he was appointed, should first be obtained. Property in the hands of a Receiver is in the custody of the Court; he is not liable to suit in respect of such property in any Court except that of which he is an officer; and a Receiver so appointed by judicial authority, cannot be subject to suit except with the leave of the Court whose officer he is, granted in the cause in which he was appointed. It follows, consequently, that a right asserted against a Receiver to property rightfully in his hands must ordinarily be worked out either in the action in which the Receiver was appointed or in an independent action brought duly upon the leave of the Court by which the appointment was made. Searle v. Choat(7), Angel v. Smith(8), Porter v. Savin(9), Miller v. Ram Ranjan and Barton v. Barbour(11). The object of the rule is to protect the estate in the hands of a Receiver from unnecessary and expensive litigation, to preserve it for the equal benefit of those equally interested in its distribution, and to keep the property at all times within control of the Court, which cannot be done if the Receiver might be sued without its leave or perhaps without its knowledge in any other Court or jurisdiction; much less can this object be gained if decrees against the property were allowed to be passed without the knowledge and behind the back of the Receiver. In fact, as pointed out by this Court in the cases of Ashton v. Madhab Mom and Hem Chunder v. Prankristo (which was not followed on the Original Side of this Court in Jogendra Nath v. Debendra Nath, if in execution of such a decree, the property is sold without notice to the Receiver, the sale is liable to be cancelled upon a proper application to the execution Court. It is obvious, however, that the Receiver of the property of a party to litigation, is not a necessary party if no attempt is made thereby to interfere with the right of the Receiver to the property entrusted to his care. In illustration of this proposition, reference may be made to the case of Janki Koer v. Sham Shivendra where it was ruled that a Receiver appointed in the course of a mortgage suit is not a necessary party to a suit by a creditor of the mortgagor, for the enforcement of a purely personal claim against him; but in an action to enforce a lien against a specific property in which a Receiver is interested, he should be made a party. This is well illustrated by the cases of Demy v. Cole(16) and Flynn v. Faith(17). In the first of these cases it was pointed out that although a Receiver is in one sense the custodian of the property involved in the litigation in which he is appointed, he has such special property therein as to make him the representative of the rights of the parties in all actions or proceedings affecting the property; and in this character, he is entitled to notice in all cases in which parties would have been entitled to be brought before the Court had there been no Receiver. As was observed in Henning v. Raymond(18), the title to the property for the time being and for the purpose of administration and disposition, may in one sense, be said to be in the Court; the Receiver is the right arm of the Court in exercising the jurisdiction invoked in such cases, and he is consequently entitled to be represented in a suit the result of which may be to affect the property in custodia legis. Jaggat Tarini v. Naba Gopal. In the second case, it was observed that although the Receiver is a proper and necessary party, he ought not to be sued alone, but ought to be joined as a Defendant along with the parties who are primarily liable to satisfy the claim of the Plaintiff, and upon whose liability, if any exists, a judgment must be finally entered [see also the notes to American Bank v. Me. Gettigan(20)]. It cannot be disputed that under such circumstances the Receiver is a proper party and he may be admitted on his own application to appear and defend, if the interest which he represents renders it proper or necessary; and he is not only a proper but also a necessary party by way of addition to and not substitution for the parties primarily responsible, if the object of the suit is to affect a property lawfully in his charge. We must consequently hold in the present case that the Receiver ought to have been joined as a party Defendant.
The learned Vakil for the Appellants has suggested that if in the opinion of the Court, the Receiver was a necessary party, the Court should have made an order for his joinder under sec. 32 of the Code of 1882, which corresponds to Order 1, Rule 10, sub-rule 2 of the Code of 1908. In our opinion the Plaintiffs were deliberately in default, and the Court was not bound to assist them in the manner suggested. Besides, the Court could not of its own motion add the Receiver as a party Defendant, when leave of the Court was essential. It has further been suggested on behalf of the Plaintiffs that leave of this Court could not have been obtained without some delay. This, in our opinion, is an idle excuse. The suit of the Plaintiffs was instituted nearly two years ago, and but for obstinacy on their part, the necessary leave might have been obtained, and the Receiver added as a party long ago so as to remove all objections on the ground of defect of parties. It is, moreover, not improbable that if the Receiver had been apprised of the claim of the Plaintiffs and if upon investigation he had found it to be just, he might have satisfied the claim from the assets in his hands. The Plaintiffs are, therefore, solely to blame for the embarrassment in which they now find themselves. But as the objection taken in the Courts below was one of some novelty, and as a fresh suit, if now commenced, would be successfully met by the plea of limitation as to a considerable portion of the claim, we think that the Plaintiff may well be allowed another opportunity to assert their rights; but this can be granted only by way of indulgence upon payment of all costs to the Defendants. While, therefore, we hold that the view of the law taken by the Courts below is correct, we direct that if the Plaintiffs deposit in this Court within one month from this date, the costs incurred by the Defendants, here as well as in the Court of the District Judge, the appeal be allowed, the decrees of the Courts below be set aside, and the suit be remanded to the Court of first instance to enable the Plaintiffs to take the necessary steps to have the Receiver added as a party Defendant. If the costs are not deposited within the time allowed, the decree of the District Judge will stand confirmed, and this appeal will be dismissed with costs.
Appeal dismissed.
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