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1911 DIGILAW 336 (CAL)

Musstt Khubsurat Kuer v. Saroda Charan Guha

1911-08-23

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JUDGMENT 1. This appeal is directed against an order by which a Receiver has been appointed in a mortgage suit under Or. 40, r. 1 of the Code of 1908. The mortgagee commenced a suit to enforce his security, on the 10th January 1910. An ex parte decree was made on the 22nd February 1911. On the 2nd March following, the mortgagee applied for the appointment of a Receiver. That application has been granted and Mr. G. M. Dey, Barrister-at-Law, has been appointed Receiver. On behalf of the Defendant in the mortgage suit, the order has been questioned before us on two grounds; namely, first, that a Receiver is Receiver is unnecessary for the purposes of the mortgage suit because a Receiver has already been, appointed in a partition suit amongst the owners of the properties ; and, secondly, that the appointment of the Receiver is premature, because under the mortgage decree the mortgagee is not entitled to appropriate the profits of the properties given as security. In our opinion there is no substance in the first contention, but the second must prevail. In so far as the first contention is concerned, it has been stated to us that in 1901 a partition suit was commenced amongst the owners of the properties in which a consent decree was made on the 31st May 1902. With a view to give effect to that decree, a Receiver was appointed. The properties given by way of mortgage include, however, not merely the properties under the charge of the Receiver in the partition suit, but also two other properties. In so far as the latter properties are concerned, the appointment of the Receiver in the partition suit clearly does not operate as a bar. But we are of opinion that even in respect of the other properties, a Receiver may very well be appointed in the mortgage suit, although a Receiver has been appointed in the partition suit. The Receiver in the partition suit acts under the direction of the Court in which that suit is pending and the sums collected by him are bound to be applied for the benefit of the parties to that litigation, under the direction of the Judge. The Receiver in the partition suit acts under the direction of the Court in which that suit is pending and the sums collected by him are bound to be applied for the benefit of the parties to that litigation, under the direction of the Judge. In other words, the Receiver is bound to pay the money either into the hands of the proprietors or to their creditors and other persons entitled to the proceeds of the properties. On the other hand, if a Receiver is appointed in the mortgage suit he is bound to apply the proceeds for the benefit of the mortgagee. It has been suggested, however, that if different persons are appointed Receivers in the partition suit and the mortgage suit, there may possibly be a conflict between them, because undoubtedly the two Receivers could not simultaneously collect the proceeds of the same properties. [Searle v. Choat 25 Ch. D. 723 (1884). Beach on Receivers, sec. 233]. We are of opinion that there is no substance in this contention. The difficulty my be avoided either by the appointment of the same person as Receiver in the two suits, or if different persons are appointed as Receivers, the collection may be made by one of the Receivers only, (for instance, by the Receiver in the partition suit), but the sums collected by him and payable to the mortgagors placed in the hands of the Receiver in the mortgage suit to be applied for the benefit of the mortgagee under the direction of the Judge. [Cf. Madaneswer Singh v. Mahamaya Prosad Singh 13 C. L. J. 487 (1911)]. We are of opinion, therefore, that the first ground urged by the learned Vakil for the Appellant cannot be sustained. 2. In so far as the second contention is concerned, it has been urged that the object of the appointment of a Receiver in a mortgage suit is to secure the application of the profits of the mortgaged properties for the benefit of the mortgagee. If the decree is for sale, and if it is established that the security is not sufficient to satisfy the judgment-debt, a Receiver will be appointed almost as a matter of course, specially if there has been default in the payment of interest. [Weatherall v. Eastern Mortgage Agency Co. 13 C. L. J. 495 (1911), Hopkins v. Worcester Canal Co. L. R. 6 Eq. [Weatherall v. Eastern Mortgage Agency Co. 13 C. L. J. 495 (1911), Hopkins v. Worcester Canal Co. L. R. 6 Eq. 447 (1868), Herbert v. Greene 3 Ir. Ch. 273 (1854), Hacket v. Snow 10 Ir. Eq. 220]. But here the position is different. The mortgagee has obtained a decree for foreclosure, which does not entitle him to recover even the costs of the litigation from the mortgagors personally. Whether the decree has in this respect been properly drawn up or not, we are not called upon to consider. But under the decree as it now stands, the only right of the mortgagee is to foreclose the mortgagors and to take the property in lieu of his dues on his security ; he is not entitled to the profits of the property. Consequently, a Receiver need not be appointed at this stage, because even if a Receiver were appointed, he could not apply the profits of the property for the benefit of the mortgagee. There is no suggestion that the properties are liable to be sold away in satisfaction of paramount charges. The position may be compared to that of a mortgagee who has the legal estate and can recover possession by ejectment. [Silver v. Bishop of Norwich 3 Swanston 115n. (1816), Berney v. Sewell 1 J. & W. 647 (1820), Sturch v. Young 5 Beav. 557 (1842), Ackland v. Gravener 31 Beav. 482 (1862)]. From this point of view, the second objection of the Appellant must be sustained. 3. The result is that this appeal is allowed and the order of the Court below discharged on the ground that the application for the appointment of a Receiver is premature. We may add that a contingency may very possibly arise which may necessitate the appointment of a Receiver in these proceedings. The time allowed by the decree for the payment of the judgment-debt by the mortgagors has just expired, and, as we have been informed, the amount has not yet been paid. Consequently, under Or. 34, r. 3, of the Code of 1908, if the mortgagee applies for the final decree in the foreclosure suit, he is entitled to have the final decree drawn up as a matter of course, unless indeed the mortgagors can establish good cause for an extension of time which can be granted only on terms. Consequently, under Or. 34, r. 3, of the Code of 1908, if the mortgagee applies for the final decree in the foreclosure suit, he is entitled to have the final decree drawn up as a matter of course, unless indeed the mortgagors can establish good cause for an extension of time which can be granted only on terms. As soon as the final decree is made in his favour, the mortgagee is entitled to apply for execution and delivery of possession ; such possession may be delivered under r. 3 of Or. 34 or upon an application under sec. 51 of the Code. But it has been suggested that if an application of this character is made, the judgment-debtors are likely to apply for an adjournment of the proceedings, inasmuch as some of them have applied to have the ex parte decree vacated, while an appeal has also been preferred against that decree to this Court. If such an application is made, the successful decree-holder is entitled to contend that as now he has become the full owner of the property, he is entitled to possession and to receive the profits thereof. If the judgment-debtors seek to keep him out of possession of the property he may reasonably demand either security for the profits or the appointment of a Receiver under clause (d) of sec. 51 of the Code. It will, therefore, be open to the decree-holder to apply at once to the Subordinate Judge for a final decree under r. 3 of Or. 34 ; and unless it is proved that the mortgage-debt has been satisfied, or that there are good grounds for extension of time, (upon terms as to security or appointment of Receivers), it would be incumbent upon the Subordinate Judge to make the final decree. As soon as he makes the decree, the decree-holder will be entitled to be placed in possession. If at this stage the judgment-debtors apply that they may be allowed to continue in possession, occasion may arise for the appointment of a Receiver or the demand of security from the judgment-debtors. With these observations, we allow the appeal, but without costs.