Case: Podar Mills Limited Vs. State Bank of India

( 2 ) THE plaintiffs are the State Bank of India. The suit is filed against the 1st defendants for recovery of the sum of Rs. 13,59,49,986. 59 due by the 1st defendants under a cash credit account and the sum of Rs. 1,16,58,682. 59 due under a term loan account and interest thereon. The suit prays for a declaration that the aforementioned sums are secured by a valid and subsisting equitable mortgage in respect of two immoveable properties at Bombay and land admeasuring 35,380 square meters with structures thereon at3 ) IT is an admitted position that, by reason of the provisions of the Textile Undertakings (Taking Over of Management) Act, 1983, the textile undertakings of the 1st defendants situated at Bombay have been taken over and vest in the Central Government. The only security in the form of immoveable property which is, therefore, available to the plaintiffs is the immoveable property at4 ) IT was contended before the learned Single Judge that, by reason of the provisions of section 8 (1) (c) of the said Taking Over of Management Act, a receiver could not be appointed of the immoveable property at Jaipur. The learned Single Judge, upon an interpretation of section 8 rejected the contention. He also rejected the contention that, this being a case of an equitable mortgage in which the mortgagee has no right to possession, no receiver could be appointed. He came to the conclusion that a case for the appointment of a receiver had been made out by the plaintiffs.

Reasoning:
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.