Case: Hiralal Patni Vs. Loonkaram Sethiya &amp; Others

2. This case illustrates how the enforcement of an interlocutory order appointing a Receiver made in the interest of all the parties concerned could be obstructed and the object of the order itself be defeated by dilatory tactics adopted by one party or other.3. At Agra, there were three spinning mills and one flour mill, all of which together were described as the Johns Mills; and, originally, the John family or their predecessors were the owners of all these mills. At the time the present proceedings were initiated, other persons had acquired interest therein. The following persons were the joint owners of the mills: (1) Hiralal Patni, ( the appellant, and Munni Lal Mehra . . . .19/40th sharer; (2) Gambhirmal Pandia Private Ltd ... ... 8/ 40th share; (3) Messrs. John and Co............11/ 40th share; and (4) I. E. John ...... . . .2/40th share. Seth Loonkaran Sethiya, respondent No. 1 advanced large amounts to Messrs. John and Co. on the security of its business assets and stocks. On April 18, 1949, the said Sethiya filed O. S. No. 76 of 1949 in the Court of the Civil Judge, Agra, against John and Co. for the recovery of the amount due to him by sale of the assets of the said company. To that suit the partners of Messrs. John and Co. for convenience described as defendants 1st set", and the partners of Messrs. Johns Jain and Co., who were for convenience described as "defendants 2nd set", were made parties. Pending the suit, the said Sethiya filed an application under O. XL, R. I, Code of Civil Procedure, for the appointment of a Receiver. By an order. dated May 21, 1949, the learned Civil Judge appointed two joint Receivers and directed them to run the three spinning mills. Hiralal Patni filed an appeal against that order to the High Court at Allahabad, and the said Court by its order dated . August 22, 1949, modified the order of the Civil Judge confining the order of appointment of Receivers only to the share of Messrs John and Co. in John Jain Mehra and Co. Loonkaran Sethiya made another application in the Court of the Civil Judge for the appointment of a Receiver for the property of Hiralal Pani and the learned Civil Judge by his order dated December, 1951, directed the Receivers to take possession of the appellants share in the mills also. Against this order an appeal was preferred to the High Court and the operation of the said order was stayed pending the disposal of the appeal. On April 5, 1954, the Civil judge passed a preliminary decree against the defendants therein directing them to deposit the decree amount in court within the prescribed time, and in default the plaintiff was given a right to apply for a final decree for sale of the business assets of the defendants. The decree also gave a right to apply for a personal decree in case the sale proceeds were not sufficient to discharge the decree. The preliminary decree directed that the Receivers should continue on the property until discharged. Hiralal Patni preferred an appeal to the High Court against the said preliminary decree and applied for interim stay of its operation. On August 23, 1955, the High Court discharged the Receivers appointed by the learned Civil Judge, and appointed another Receiver in their place. On March 25 1955, the learned Civil Judge prepared a scheme for running the mills, and the parties preferred appeals against that scheme to the High Court. The said appeals were compromised and under the terms of the compromise the parties agreed to take different mills on lease for a period of three years from the Receiver. On January 14. 1956, the Receiver executed a lease in respect of the flour mill in favour of Hiralal Patni for a period of three years. Under the lease deed it was agreed that he should deliver the demised premises to the Receiver upon the expiry of the term. In due course, on March 14, 1956, a final decree was made in the suit for the sale of the properties, but the final decree was silent in regard to the Receiver appointed earlier. On September 29, 1958, Hiralal Patni applied to the High Court for extension of the lease by three years. On January 16, 1959, the High Court rejected the application on the ground that the lease was only a stopgap arrangement and that it was for the Receiver to make a fresh arrangement for the future under the supervision and directions of the Civil Judge, Agra. On January 17, 1959, the Receiver applied to the Civil Judge for instructions whether he should proceed at once to dispossess the appellant. On notice Hiralal Patni raised various objections and claimed that he was entitled to remain in possession of the property as its owner. The learned Civil Judge disallowed his objections and held that the Receiver derived his authority from the preliminary decree, and directed the Receiver to lease out the said flour mill by auction for a period of two years. Pursuant to that order, an auction was held, and the appellant was the highest bidder, and he paid the lease amount and executed a formal lease deed. Not satisfied with the order of the Civil Judge, Hiralal Patni preferred an appeal to the High Court. The High Court in an elaborate judgment considered the contentions raised on behalf of Hiralal Patni and dismissed the appeal. Hence the present appeal.

Court's reasoning:
Whatever terminology may have been used, the fact remains that the Receivers were put in charge of the entire property of defendants 1st set, which includes their share in the mills, though it was equally made clear that the Receivers could not directly run the mills without further directions in thatdo not think that the scope of the orders is so limited. The combined effect of the said earlier orders was that the Receivers shall take possession of the entire properties of the two sets of defendants. But the Receivers were not given the power to run the mills without specific directions to that effect by the court. The Civil Judge by his order dated March 25, 1955. evolved a scheme for running the mills, and by that order he laid down the conditions and directed the Receivers to advertise calling for applications from persons, including the Government, who were willing to run the mills. This order was only confined to the three spinning mills. The compromise order in the appeals covered also the flour mill. Though different mills were to be run by different defendants by obtaining lease deeds, that was only a mode evolved for running the mills under the supervision of the court. Under the compromise, the leases were to be executed in favour of the Receiver. It also provided that in case the lessees did not carry out the terms of the lease, the Receiver should take possession of the mill in respect of which default was committed and, with the permission of the court, should lease out the mill to any of the defendants other than the defaulting party. The clauses saving the rights of the parties obviously refer to their rights which were the subject-matter of the suit and they could not have any reference to the terms agreed upon under the compromise order. Under the compromise order, the courts, though by consent, gave directions for running the mills which they left out for future consideration in their earlier orders. The result was that under the earlier orders, all the properties of the defendants were put in possession of the Receivers, and under the compromise order, the Receiver was directed to run the mills under the agreedis manifest from the aforesaid orders that the Receiver was not in possession of the entire property of the defendants, that he was not empowered to run the mills personally, that by subsequent orders he was directed to lease out the mills to the parties in the manner prescribed and that under the final order he was to take over possession and make other arrangements for running the mills. In the premises, we find it very difficult to accept the argument of learned counsel that the Receiver was not put in possession of the mills, but the mills continued to be in the possession of the defendants. We hold on a construction of the relevant orders that the flour mill of the appellant was also put in the possession of the Receiver and that the appellant was running the said mill under the compromiseS. 51(d) nor order XL of the Code of Civil Procedure prescribes for the termination of the office of receivership.We law may briefly be stated thus : (1) If a receiver is appointed in a suit until judgment, the appointment is brought to an end by the judgment in the act on (2) If a receiver is appointed in a suit, without his enure being expressly defined, he will continue to be receiver till he is discharged, (3) But, after the final disposal of the suit as between the parties to the litigation, the receivers functions are terminated, he would still be answerable in the court as its officer till he is finally discharged. (4) The court has ample power to continue the receiver even after the final decree if the exigencies of the case so require.12. Let us now apply the said principles to the facts of the instant case. The order appointing the Receivers did not expressly state that the Receivers term would expire on the termination of the suit. Under the Preliminary decree the plaintiff became entitled to apply for the passing of the final decree for the sale of the property charged and also to get a personal decree against the defendants 1st set and 2nd set for the balance of his claim remaining due after the sale. The preliminary decree expressly directed the Receivers to continue until discharged. Pursuant to the preliminary decree, a final decree for sale of the said properties was made, but the said decree did not in any way modify the direction given in the preliminary decree in respect of the Receivers. The combined effect of the two decrees is that the final decree did not terminate the suit, for the plaintiff would still be entitled to get a personal decree in case the sale proceeds were not sufficient to pay off his dues. It cannot, therefore, be said that the suit has been finally disposed of. That apart, the preliminary decree in express terms directed the Receiver to continue till they were discharged.In the circumstances, we are definitely of the opinion that the Receivers continued by the preliminary decree are entitled to function in that capacity till they arecourt, in our view, was legally competent to confer a power on the Receiver under Order XL, R. 1 (1)(d), of the Code of Civil Procedure to recover the property from the appellant.14. The decisions cited at the Bar are not of much relevance to the presentcitation would be redundant. These and such decisions seem to hold that a court cannot evict a lessee from a receiver, whether he is a party to the suit or not, in exercise of its summary jurisdiction unless the lease expressly conferred a right of re-entry under the lease deed on the receiver. It is not necessary to demarcate the boundaries of the summary jurisdiction of a court in managing an estate through a receiver, for in this case we are clearly of the opinion that the appellant was in possession of the mill under an agreed and integrated scheme for running the mills by the different partners, though he was put in possession under a document described as a lease deed. In effect the Receiver, during the course of the management, entrusted each mill to one of the partners so that the mills might be properly worked under experienced hands. The appellant expressly agreed to put the Receiver in possession of the mill after the expiry of three years. No question of deciding the conflicting claims of a lessee and a third party arises in this case; nor is the court called upon to pronounce on the vested rights of a lessee in conflict with those of the Receiver. But this is a simple case of a court in the course of its administration of the estate through the agency, of a Receiver making a suitable provision for the running of the mills. As the agreed term had expired the court, in our view, could certainly direct the appellant to put the mill in the possession of the Receiver.15. Lastly it has been brought to our notice that an application for the discharge of the Receiver is pending in the lower court. Any observations that we have made in this judgment are not intended to affect the merits one way or other in the disposal of that application. That application will be disposed of in accordance with law.