Case: U.P. State Sugar Corporation and Anr Vs. Mahalchand M. Kothari and Ors

representative of the property placed in his hands as such. In determining his liability the court will only determine the liability of the property. It is not material whether the liability existed before or has accrued since his appointment. A contractual liability arising against the receiver during the course of management of the property for acts or omissions committed by him for the benefit of the property, is not merely enforceable against the receiver but is a liability attached to the property in his receivership, which can be recovered from the property and through the person in whom the property vests. [See Statement of law in Words and Phrases, Permanent Edition Vol.36 at page 742 from the Heading - Representative of property]33. As is the admitted position, on the coming into force of the Ordinance, the Sugar Mill stood transferred to and vested in the Corporation on the appointed date 3.7.1971. On that date, the Receiver appointed by the Collector under the provisions of 1950 Act was already holding custody of the Sugar Mill and was managing the same. During course of the Writ Petition filed by the owner of the Sugar Mill in which the constitutional validity of the ordinance/Act was challenged, a stay order, on the limited terms and conditions, was passed on 9.7.1971. the terms and conditions of the order reproduced above, restored the de jure possession of the Sugar Mill to the erstwhile owner but de facto possession and management of the Sugar Mill was allowed to remain undisturbed with the receiver although with limited powers to him. The Receiver was specifically allowed in accordance with term No.3 of the stay order to sell sugar, molasses and other waste products. By virtue of the order of stay passed by the High Court, during pendency of the writ petition, the Receiver appointed under the Act of 1950, continued to manage the Sugar Mill subject to the ultimate result of the writ petition. The Writ Petition ultimately came to be dismissed on 3.5.1979 and the stay order containing the terms and conditions (quoted above) passed on 9.7.1971 stood automatically vacated. The natural consequence was restoration of full operation of the provisions of the ordinance/Act as was originally passed. In accordance with Section 3 of the Act, the Sugar Mill stood transferred and vested in the Corporation from the appointed date 3.7.1971. On vacation of the stay order with effect from the appointed day-3.7.1971, the operation of the Ordinance/Act was revived. The liability arising from breach of contract committed by the Receiver was not of the Corporation. It was on obligation attached to the property of the Sugar Mill which was under the management of the Receiver, initially under the 1950 Act and continued under the order of stay passed by the High Court. Since the liability towards breach of contract was attached to the sugar mill under the management of the Receiver, the Corporation in whom title of the sugar mill stands vested under Section 3 of the Act cannot avoid the liability - it being a burden on the said property and recoverable from it.34. It is of no importance or consequence that actual or de facto possession of the property was received by the Corporation under a formal order of Collector, Deoria on 23.5.1979, only after dismissal of the Writ Petition on 3.5.1979 and consequent discharge of the Receiver.35. The Ordinance was stayed by the High Court to restore status quo ante existing on 2.7.1971 that is a day prior to appointed date 3.7.1971. But on the dismissal of writ petition and automatic vacation of the stay order of the High Court, the operation of the Ordinance/Act with all legal consequences flowing from the said law stood restored from the appointed date. The trial court and the High Court are perfectly right in holding in their judgments that the order of stay passed in writ petition could have no effect of postponing the appointed day; statutorily fixed under section3 of the Ordinance/Act.36. The argument advanced on behalf of the corporation cannot be accepted that the Sugar Mill came to be transferred to the Corporation only when its actual possession was formally obtained from the Collector, Deoria on 23.5.1979 after dismissal of the writ petition.37. The legal status and position of a receiver appointed by the Court and a Receiver appointed under in a Statute are different. In the instant case, the receiver appointed under the Act of 1950 and continued by the High Court on terms and conditions contained in the stay order during pendency of the writ petition, was a statutory receiver and his rights and liabilities were attached to the property for the management of which he was appointed. The receiver was not an agent of either of the parties. For his acts and omissions, a third party could raise a claim against the party in whom the property stood vested and to which the liability was attached.38. The suits were filed by the plaintiff claiming losses and damages for breach of contract committed by the receiver within the prescribed period of limitation. On the date of filing of the suits, the receiver was not in possession of the Sugar Mill as the actual possession of the Sugar Mill had been restored to the Corporation. It was, therefore, not necessary for the plaintiff to implead the receiver as a party to the suits. The Receiver could not be made personally liable for his acts and omissions in the course of management of the Sugar Mill and which are not alleged to be mala fide.39. Our conclusion, therefore, is that as none of the parties i.e. the erstwhile owner or the Corporation is personally liable for the breach of contract committed by the receiver in the course of management of the Sugar Mill, the contractual liability of the receiver towards the plaintiff is recoverable from the property of the Sugar Mill, and therefore, through the Corporation in whom the property stands vested under the Act.

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

Explanation:
0[ds]16. From the resume of the above facts gathered out from the photocopies of the proceedings of the writ petition, the fact which conclusively emerges is that the conditional interim stay granted on 9.7.1971 in the writ petition challenging constitutional validity of the Ordinance/Act stood vacated only on the final dismissal of the writ petition on 03.5.1979. As is sought to be projected on behalf of the respondent, the stay was not vacated on 29.7.1974. On that date, some other application dated 17.3.1974 (details of which are not clear from the proceedings of the writ petition) happened to be allowed. The further proceedings in the writ petition clearly go to show that the application for vacating stay remained pending on 22.5.1976 and 08.7.1976. It was never decided during pendency of the writ petition. The stay order stood vacated only when judgment was delivered on 03.5.1979 and the writ petition questioning the validity of the Ordinance/Act was dismissed.17. On these facts culled cut from the proceedings of the writ petition, it is clear that Receiver entered into alleged contract for Supply of agreed quantities of sugar to the plaintiff respondent on 2.2.1979 and 9.2.1979 when stay order dated 9-7-1971 passed in the writ petition was in operation.From the terms and conditions of the above quoted order of stay passed on 9-7-1971, what seems to us is that the operation of the impugned Ordinance/Act was partially stayed on specified conditions to regulate the power of the Receiver which was already managing the Sugar Mill under section 279(1)(g) read with section 286A of the Act of 1950. The legal effect of the order of stay (quoted above) was that the Receiver which was appointed under the Act of 1950, was to continue in management of the Mill on the conditions imposed by the High Court. From term no.3 in the stay order, it is clear that the Receiver had only power to carry on day-to-day business of the Sugar Mill and for that purpose, to sell sugar, molasses and waste products. The Receiver, when entered into the alleged contract in February, 1979 to supply sugar to the plaintiff respondent was acting as a statutory Receiver who was allowed with added conditions to continue in management of the Sugar Mill by the High Court in accordance with section 279(1)(g) and Section 286-A of the Act of 1950. Under the terms of the stay order, the status-quo as existing on 2.7.1971 i.e. a day before the appointed day was restored and the erstwhile owner was directed to be put back in possession of the Sugar Mill. The de jure possession of the Sugar Mill was thus restored to the erstwhile owner but de facto possession on terms and conditions contained in the order of stay was allowed to be retained by the Receiver with right to manage the Sugar Mill.From the aforesaid provisions of the Act of 1950 and the Ordinance/Act, it is clear that the Receiver who was in the management of the Sugar Mill on the appointed day was not a Receiver appointed by any Court. He was a Receiver appointed by the Collector under the Act of 1950 and on the vesting of the Sugar Mill on the appointed date 3.7.1971, was in possession and management of the Sugar Mill not as an agent either of the erstwhile Sugar Mill owner or the corporation. He was a statutory Receiver appointed under section 279(1)(g) read with section 286-A of the Act of 1950 for the purpose of recovery of dues of the cane-growers in the manner as arrears of land revenue. He was allowed to continue in management of the Sugar Mill by the High Court on the terms and conditions imposed in the order of stay passed during pendency of the writ petition.29. The liabilities incurred by a statutory Receiver in the course of management of the Sugar Mill are liabilities attached to assets or properties of the Sugar Mill because neither the erstwhile owner nor the Corporation, which later acquired the Sugar Mill, was responsible for the alleged losses or damages caused to the plaintiff by the alleged breach of contract committed by the receiver in non-supply of the quantity of sugar.30. The general rule is that a receiver takes the rights, causes, and remedies which were in the individual or estate whose receiver he is, or which were available to those whose interests he was appointed to represent. Ordinarily none of the parties to the suit in which a receiver was appointed is personally responsible for losses and liabilities incurred in the administration of the receivership, but, except as the receiver may be personally liable therefor, such losses and liabilities fall on the estate. [See statement of law in Corpus Juris Secundum Vol.75 Articles 325 & 187 at pages 833 and 1000, respectively]31. In the present suit, the Receiver has not been impleaded as a party-defendant and there is no claim against him for any misconduct committed by him in management of the Sugar Mill. He is not alleged to be personally liable for the alleged breach of contract. The liability, therefore, towards the alleged loss or damage arising from breach of contract attaches to the Sugar Mill and can be allowed to be realized from the person in whom the title of Sugar Mill stands vested.32. A statutory Receiver is merely the legal representative of the property placed in his hands as such. In determining his liability the court will only determine the liability of the property. It is not material whether the liability existed before or has accrued since his appointment. A contractual liability arising against the receiver during the course of management of the property for acts or omissions committed by him for the benefit of the property, is not merely enforceable against the receiver but is a liability attached to the property in his receivership, which can be recovered from the property and through the person in whom the property vests. [See Statement of law in Words and Phrases, Permanent Edition Vol.36 at page 742 from the Heading - Representative of property]33. As is the admitted position, on the coming into force of the Ordinance, the Sugar Mill stood transferred to and vested in the Corporation on the appointed date 3.7.1971. On that date, the Receiver appointed by the Collector under the provisions of 1950 Act was already holding custody of the Sugar Mill and was managing the same. During course of the Writ Petition filed by the owner of the Sugar Mill in which the constitutional validity of the ordinance/Act was challenged, a stay order, on the limited terms and conditions, was passed on 9.7.1971. the terms and conditions of the order reproduced above, restored the de jure possession of the Sugar Mill to the erstwhile owner but de facto possession and management of the Sugar Mill was allowed to remain undisturbed with the receiver although with limited powers to him. The Receiver was specifically allowed in accordance with term No.3 of the stay order to sell sugar, molasses and other waste products. By virtue of the order of stay passed by the High Court, during pendency of the writ petition, the Receiver appointed under the Act of 1950, continued to manage the Sugar Mill subject to the ultimate result of the writ petition. The Writ Petition ultimately came to be dismissed on 3.5.1979 and the stay order containing the terms and conditions (quoted above) passed on 9.7.1971 stood automatically vacated. The natural consequence was restoration of full operation of the provisions of the ordinance/Act as was originally passed. In accordance with Section 3 of the Act, the Sugar Mill stood transferred and vested in the Corporation from the appointed date 3.7.1971. On vacation of the stay order with effect from the appointed day-3.7.1971, the operation of the Ordinance/Act was revived. The liability arising from breach of contract committed by the Receiver was not of the Corporation. It was on obligation attached to the property of the Sugar Mill which was under the management of the Receiver, initially under the 1950 Act and continued under the order of stay passed by the High Court. Since the liability towards breach of contract was attached to the sugar mill under the management of the Receiver, the Corporation in whom title of the sugar mill stands vested under Section 3 of the Act cannot avoid the liability - it being a burden on the said property and recoverable from it.34. It is of no importance or consequence that actual or de facto possession of the property was received by the Corporation under a formal order of Collector, Deoria on 23.5.1979, only after dismissal of the Writ Petition on 3.5.1979 and consequent discharge of the Receiver.35. The Ordinance was stayed by the High Court to restore status quo ante existing on 2.7.1971 that is a day prior to appointed date 3.7.1971. But on the dismissal of writ petition and automatic vacation of the stay order of the High Court, the operation of the Ordinance/Act with all legal consequences flowing from the said law stood restored from the appointed date. The trial court and the High Court are perfectly right in holding in their judgments that the order of stay passed in writ petition could have no effect of postponing the appointed day; statutorily fixed under section3 of the Ordinance/Act.36. The argument advanced on behalf of the corporation cannot be accepted that the Sugar Mill came to be transferred to the Corporation only when its actual possession was formally obtained from the Collector, Deoria on 23.5.1979 after dismissal of the writ petition.37. The legal status and position of a receiver appointed by the Court and a Receiver appointed under in a Statute are different. In the instant case, the receiver appointed under the Act of 1950 and continued by the High Court on terms and conditions contained in the stay order during pendency of the writ petition, was a statutory receiver and his rights and liabilities were attached to the property for the management of which he was appointed. The receiver was not an agent of either of the parties. For his acts and omissions, a third party could raise a claim against the party in whom the property stood vested and to which the liability was attached.38. The suits were filed by the plaintiff claiming losses and damages for breach of contract committed by the receiver within the prescribed period of limitation. On the date of filing of the suits, the receiver was not in possession of the Sugar Mill as the actual possession of the Sugar Mill had been restored to the Corporation. It was, therefore, not necessary for the plaintiff to implead the receiver as a party to the suits. The Receiver could not be made personally liable for his acts and omissions in the course of management of the Sugar Mill and which are not alleged to be mala fide.39. Our conclusion, therefore, is that as none of the parties i.e. the erstwhile owner or the Corporation is personally liable for the breach of contract committed by the receiver in the course of management of the Sugar Mill, the contractual liability of the receiver towards the plaintiff is recoverable from the property of the Sugar Mill, and therefore, through the Corporation in whom the property stands vested under the Act.