Case: Podar Mills Limited Vs. State Bank of India

questioned.( 17 ) NOW, it will be seen that the learned Single Judge exercised his discretion and appointed the receiver. As the Privy Council noted in the case of Benoy Krishna, the power of making interlocutory orders is not a suitable subject for review, and such orders should not reviewed in the absence of special circumstances. The authorities of this Court and, indeed, of other High Court show that even in cases of simple mortgage, which, by reason of section 96 of the Transfer of Property Act, are placed on a par with equitable mortgages, a receiver can be appointed if it is just and convenient to do so. A receiver is appointed to protect the mortgaged property pending the disposal of the suit if the circumstances of the case so warrant. ( 18 ) THIS brings us to the present circumstances. The suit is filed by the State Bank of India for recovery from the 1st defendants of loans aggregating to, approximately, Rs. 14 crores, 76 lacs. The loan accounts have, admittedly, been dormant since, 1984, which means that no part of the outstandings, which are public monies, have been recovered by the plaintiffs. We asked Mr. Doctor what the 1st defendants defence to the suit was, and he drew our attention to the 1st defendants affidavit is reply to the Notice of Motion. It is there stated that all papers, books of accounts and other documents relating to the 1st defendant mills have been handed over to the Custodian appointed under the Taking Over of Management Act so that "in absence of the relevant papers being available with the defendant, it is virtually impossible for the defendants No. 1 to deal with the allegations made in the plaint or in the affidavit in support of the Notice of Motion". Such a traversal of the allegations in the plaint and in the affidavit in support of the Notice of Motion would suggest that the plaintiffs have, in the phrase of the Madras High Court, a "very excellent" chance of succeeding in the suit. The management of the 1st defendants textile undertakings at Bombay was taken over under the Taking Over of Management Act in October 1983. Admittedly, the 1st defendants textile undertakings at Jaipur has been closed since August 1985. The plaintiffs alleged in the affidavit in support of the Notice of Motion that the property at Jaipur was unprotected. In reply the 1st defendants stated that the plaintiffs had themselves appointed security staff to protect it. In a further affidavit filed by the plaintiffs it was alleged that the 1st defendants were partitioning the Jaipur property, the security staff was obeying the 1st defendants management and it was apprehended that machinery would be removed by the 1st defendants therefrom. It was also apprehended that the partitioning was being carried out with the intention of creating third party rights therein. This affidavit remains uncontroverted. ( 19 ) MR. Doctor submitted that the plaintiffs had been guilty of such delay as disentitled them to an order for a receiver. He pointed out that the operation of the loan accounts had stopped in 1984. The suit had been filed in December 1986. The application for ad-interim relief had been made in February 1987 and the order for inventory by the Court Receiver made on that application was implemented only in August 1987. We do not think that, even in ordinary circumstances, we would have declined a receiver on this ground alone. Here, additionally, we must bear in mind that the claim is in respect of public monies in so large an amount as, approximately, Rs. 14 crores, 75 lacs. Such security as is now available to the plaintiffs must, therefore, be protected.( 20 ) THERE is, therefore, no reason for us to interfere with the discretion exercised by the learned Judge (except to the extent we now state ). Upon the facts, the order appointing the receiver was certainly called for. ( 21 ) THE learned Judge directed the Court Receiver to appoint the 1st defendants his agents on such terms and conditions as he deemed proper and if the 1st defendants were not willing or were not in a position to accept the terms and conditions of the agency, the Court Receiver was given liberty to sell the hypothecated machinery and moveables and retain the sale proceeds with himself. Mr. Doctor submitted that the 1st defendants should be appointed the Court Receivers agents without any condition as to security or compensation. He said that the only income which the 1st defendants now derived was the sum of Rs. 54/- per month, which was the result of the taking over of the textile undertaking at Bombay under the Taking Over of Management Act. Having regard to this fact and the fact that the textile undertaking at Jaipur has remained closed since August 1985, no purpose will be served by the 1st defendants by taking the agency, but that is for the 1st defendants to decide. We cannot permit them to take the agency without paying any compensation or furnishing any security. If they want the agency, they must enter into an agreement with the Court Receiver to pay such compensation and furnish such security as he deems proper. ( 22 ) IF the 1st defendants are not willing or are not in a position to accept the terms and conditions of the agency, however, we do not think that it would be proper that, pending the disposal of the suit, the machinery and the moveables should be sold. We, therefore, modify the order under appeal to this extent : that if no agency agreement is entered into by the 1st defendants with the Court Receiver within a period of three months from today, the plaintiffs shall have liberty to apply, on a Notice of Motion, that the Court Receiver should be permitted to invite offers from third parties to run the 1st defendants textile undertakings at Jaipur on an agency basis.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are fortified in the construction that we have placed upon section 8 by the marginal note11 ) ACCORDINGLY, we reject the submission on behalf of the 1st defendants that the plaintiffs Notice of Motion for the appointment of the Court Receiver as receiver of the immoveable property at Jaipur was not maintainable in the absence of the consent of the Centralall these observations there can be noagree, broadly, except with the proposition that an order appointing a receiver will not be made where it has the effect of depriving a defendant of de facto possession. An order appointing a receiver which has also the effect of depriving a defendant of possession may be made if the circumstances of a case so warrant. In fact, a Single Judge of the Madras High Court itself held in (Muniammal v. Guruvayya) A. I. R. 1960 Madras 195, that where proper cause was shown and the relevant circumstances justified, a receiver could be appointed at the instance of the mortgagee even with regard to properties covered by a simpleprima facie, the fact that interest was in arrears was not enough to render the appointment of a receiver just or convenient and the Court had to be satisfied that the effect of the mortgagees conduct was not merely to postpone the final determination of the suit but to imperil the realisation of the amounts secured by theare, of course, many orders of this Court appointing receiver of property which was theof equitable mortgage where the power of the Court to do so was notauthorities of this Court and, indeed, of other High Court show that even in cases of simple mortgage, which, by reason of section 96 of the Transfer of Property Act, are placed on a par with equitable mortgages, a receiver can be appointed if it is just and convenient to do so. A receiver is appointed to protect the mortgaged property pending the disposal of the suit if the circumstances of the case soa further affidavit filed by the plaintiffs it was alleged that the 1st defendants were partitioning the Jaipur property, the security staff was obeying the 1st defendants management and it was apprehended that machinery would be removed by the 1st defendants therefrom. It was also apprehended that the partitioning was being carried out with the intention of creating third party rights therein. This affidavit remainsdo not think that, even in ordinary circumstances, we would have declined a receiver on this ground alone. Here, additionally, we must bear in mind that the claim is in respect of public monies in so large an amount as, approximately, Rs. 14 crores, 75 lacs. Such security as is now available to the plaintiffs must, therefore, be protected.( 20 ) THERE is, therefore, no reason for us to interfere with the discretion exercised by the learned Judge (except to the extent we now state ). Upon the facts, the order appointing the receiver was certainly calledregard to this fact and the fact that the textile undertaking at Jaipur has remained closed since August 1985, no purpose will be served by the 1st defendants by taking the agency, but that is for the 1st defendants to decide. We cannot permit them to take the agency without paying any compensation or furnishing any security. If they want the agency, they must enter into an agreement with the Court Receiver to pay such compensation and furnish such security as he deems22 ) IF the 1st defendants are not willing or are not in a position to accept the terms and conditions of the agency, however, we do not think that it would be proper that, pending the disposal of the suit, the machinery and the moveables should be sold. We, therefore, modify the order under appeal to this extent : that if no agency agreement is entered into by the 1st defendants with the Court Receiver within a period of three months from today, the plaintiffs shall have liberty to apply, on a Notice of Motion, that the Court Receiver should be permitted to invite offers from third parties to run the 1st defendants textile undertakings at Jaipur on an agency basis.