Baldeo Sahujee v. Gauri Shankar Jhunjhunwala — 1958 DIGILAW 135 (PAT)

Judgment R.K.Chaudhary, J. 1. The events leading to the institution of these two cases are as under: Rai Saheb Baldeo Sahujee instituted a suit for specific performance of a contract for sale of a mill and obtained a decree for the same. The plaintiff was required to deposit a sum of Rs. 1,55,000, being the balance of consideration money after deducting a sum of Rupees 10,000 which had already been paid in advance as earnest money and he deposited the said amount in court. The defendants having failed to execute a sale deed in favour of the plaintiff, the same was executed by the Court, An appeal against the decree preferred in the High Court ultimately failed and an application for leave to appeal to the Supreme Court also was rejected. During the pendency of the appeal in the High Court, defendant No. 7, who was a subsequent transferee of the Mill with notice of the contract made in favour of the plaintiff, was appointed a receiver for the working of the mill and the management of the business. The receiver, admittedly, did not run the mill, and the plaintiffs case is that as a result of the non-working of the mill, the machinery rusted and the plaintiff suffered a loss thereby. Accordingly, the plaintiff made an application in the court below for appointment of a commissioner to inquire into the loss sustained by the plaintiff, and the learned Subordinate Judge appointed a pleader Commissioner for the same on 18-12-1954, Defendant No. 7 applied for a review of the order appointing pleader Commissioner, but the same was rejected on 7-2-1955. He, therefore, filed two civil revision applications in this court, being C. R, No. 143 of 1955, and C. R. No. 144 of 1955 against the two orders referred to above, namely, the order appointing a pleader Commisisoner to make inquiry into the loss and the order rejecting the review application. He, therefore, filed two civil revision applications in this court, being C. R, No. 143 of 1955, and C. R. No. 144 of 1955 against the two orders referred to above, namely, the order appointing a pleader Commisisoner to make inquiry into the loss and the order rejecting the review application. Both these civil revision applications were disposed of on compromise the terms of which were (1) that the pleader commissioner appointed by the court below to examine accounts and for ascertainment of compensation for wilful default and gross negligence on the part of the judgment debtor No. 7 will not begin his work unless the question of liability against judgment debtor No. 7 has been decided by the court itself (2) that before judgment debtor No. 7 hands over the charge of the machinery as a receiver, a pleader commissioner will be appointed to note down the present condition of the machinery with the help of a mechanic and (3) that the plaintiff-decree-holder will take over the possession of the machinery once its condition has been noted down by the pleader Commissioner with the assistance or a mechanic. Thereafter, the plaintiff made an application in the court below for determination of the liability of defendant No. 7. The application was opposed by the defendant, and the learned Subordinate Judge accepting his objection rejected the application on the ground that the question of liability would be decided only by the institution of a separate suit and not in the summary proceeding in that Court. Against the order rejecting the application, the plaintiff has presented both the civil revision application and the miscellaneous appeal by way of precaution. 2. Mr. Sinha has contended that no appeal lay against the order in question, and as such, the same was not maintainable. Mr. Das appearing for the appellant, has conceded that the appeal did not lie. It has also been held in Chaparaddi V/s. Kabil Molla, AIR 1943 Cal 244 that such an appeal is incompetent. The appeal, therefore, has to be dismissed, but without any costs. The matter in controversy, therefore, has to be dealt with in our revisional jurisdiction in the above civil revisional application. 3. It has also been held in Chaparaddi V/s. Kabil Molla, AIR 1943 Cal 244 that such an appeal is incompetent. The appeal, therefore, has to be dismissed, but without any costs. The matter in controversy, therefore, has to be dealt with in our revisional jurisdiction in the above civil revisional application. 3. The learned Subordinate Judge took the view that the question as regards the liability of the receiver raised various complications and could not be decided in the summary proceeding specially when huge amounts have been claimed in the case and no detail which will be necessary for ascertaining the same has been claimed. He held that this question could only be decided in a properly constituted suit, and in coming to that conclusion he placed reliance on a decision of the Calcutta High Court in Subal Chandra Kar V/s. Jatindra Mohan Ghose 99 Ind Gas 761: (AIR 1927 Cal 175(1): ILR 53 Cal 881) and on a Madras case in Somasundram V/s. Kannammai, AIR 1944 Mad 392 . As regards the question whether the receiver was guilty of wilful default and gross negligence, he observed that as the running of the mill was stopped, it must be said to be wilful default and gross negligence of the receiver. Mr, Das appearing for the petitioner has contended that the learned Subordinate Judge having found that the receiver was guilty of wilful default and gross negligence ought to have decided the question of his liability under the provisions of the Order 40, Rule 4 of the Code of Civil Procedure. On the other hand, Mr. Sinha, appearing for defendant No. 7 opposite party, has contended that in view of the fact that a huge amount has been claimed as against the receiver and in view of the fact that any order that may have been passed by the learned Subordinate Judge in this summary proceeding was non-appealable, the court below was justified in directing the parties to agitate the matter in a properly constituted suit. He has also submitted that the court below has not come to any definite finding that the receiver was guilty of wilful default and gross negligence, though he has made such an observation in the sense that there might be a prima facie case with regard to such wilful default and gross negligence. 4. He has also submitted that the court below has not come to any definite finding that the receiver was guilty of wilful default and gross negligence, though he has made such an observation in the sense that there might be a prima facie case with regard to such wilful default and gross negligence. 4. Order 40, Rule 3 of the Code of Civil Procedure lays down that every receiver so appointed shall (a) furnish such security (if any) as the court thinks fit, duly to account for what he shall receive in respect of the property (b) submit his accounts at such periods and in such form as court directs (c) pay the amount due from him as the court directs; and (d) be responsible for any loss occasioned to the property by his wilful default or gross negligence. Thus, this rule makes the receiver responsible and liable for any loss to the property with respect to which he has been appointed a receiver due to his wilful default or gross negligence. Rule 4 of that Order provides that where a receiver (a) fails to submit his account of such periods and in such form as the court directs, or (b) fails to pay the amount due from him as the court directs, or (c) occasions loss to the property by his wilful default or gross negligence, the court may direct his property to be attached and may sell such property, and may apply the proceeds to make good any amount found to be due from him or any loss occasioned by him, and shall pay the balance (if any) to the receiver. This rule, therefore, in terms, lays down that the court which appointed the receiver can direct the property of the receiver to be attached for any loss occasioned to the property by his wilful default or gross negligence, and as such in my opinion, that court is entitled to investigate into the question of the liability of the receiver in that very proceeding. In other words the terms of this rule give jurisdiction to the court which appointed the receiver to investigate into the question or liability of the receiver for his wilful default and gross negligence and the finding of the court below that such question could be determined only by a separate suit as wrong in law. In other words the terms of this rule give jurisdiction to the court which appointed the receiver to investigate into the question or liability of the receiver for his wilful default and gross negligence and the finding of the court below that such question could be determined only by a separate suit as wrong in law. In the case of AIR 1927 Cal 175(1) on which reliance has been placed by the court below, no doubt it has been held that an application against a receiver for accounts to be taken on the basis of wilful default and neglect should be by way of a suit, but, in my opinion, it has not been held in that case that such a matter could be decided only in a separate suit and the Court appointing the receiver has no jurisdiction to deal with it in that very proceeding. As appears from the judgment of Rankin, J. (as he then was) the above finding was given in that case on the facts of that particular case as will appear from the following observation made by him; "If a suit has to be brought, it is much better that it should be brought in the ordinary way. The question is whether in this particular case the learned Judges order should be interfered with. In my judgment, the rule that an application of this character should be made by a suit, whether it be right or wrong, has been recognised for - a long time in this court. In my judgment, it is at any rate, a good general rule in case of any complication because there is manifest inconvenience as this case shows, in dealing with complaints of this character without a properly framed plaint and without a suit being brought in a regular manner." Thus the decision was passed because of the practice of that court as also on the ground of convenience. In taking the above view, his Lordship placed reliance on the decision of Coomar Sattya Sankar Ghosal V/s. Ranee Golapmonee Debee, 5 Cal WN 223 in which Sale, J. observed that if there is any liability attaching to the receiver other than that which appears on the face of the accounts, the proper course is to sue the receiver tor the purpose of establishing that liability, that it is impossible on an application to pass a receivers accounts to go into serious questions with regard to his liability & responsibility, which are really not dependent upon the accounts filed by him, but arise independently of his accounts and that questions of this sort can only be satisfactorily dealt with by suit. That case was decided in the year 1900 when there was no provision in the Code of Civil Procedure like that of Order 40 Rule 4 of the piesent Civil Procedure Code, In that view of the matter, the decision in that case, based on a different provision, could not be of any authority for the determination of the question based on Order 40 Rule 4 of the present Civil Procedure Code. The recent view of the Calcutta High Court on this point is different from the view taken by Rankin J. in the case of (AIR 1927 Cal 175(1)). In Suresh Chandra Banerjee V/s. A. K. M. Enamel Haq 40 Cal WN 479 a Division Bench of that Court held that a receiver may be held liable and ordered to make good any loss sustained through his wilful neglect at the time of the passing of his accounts under Rule 4, Order 40 of the Civil Procedure Code and that a separate suit for the purpose is not necessary. Their Lordships in that case distinguished the two earlier cases referred to above on the grounds already stated by me. In AIR 1943 Cal 244 Mukhar-jea, J. (as he then was) held that Order 40 Rule 4, clearly contemplates a proceeding of a summary character and not a suit, that it is open to the court to investigate questions of wilful default or gross negligence on the part of the receiver in a summary proceeding under Order 40, Rule 4, and that the filing of a separate suit is not essential. He further held that the question of wilful default and gross negligence is not a matter directly of accounts, but it is a liability which attaches to the receiver outside the accounts and consequently the question as to whether or not the accounts of particular years were formally passed by the court is immaterial for the purpose of determining whether the charges of default or negligence could be brought home against the receiver and that the investigation into the charges of wilful default or gross negligence, therefore, is not necessarily confined to the accounts of those years which have not yet been passed by the court but may extend to the accounts of the previous years already passed by the court. In Srinivas Kuppuswami V/s. M. C. Waz, ILR 45 Bom 99: (AIR 1921 Bom 427) also an observation was made that it was open to the Court under Order 40, Rule 4 to find that the receiver had occasioned loss to the property by his wilful default or gross negligence. 5. The case of AIR 1944 Mad 39.2 on which also the court below has relied has no application at all to the present case. Rule 4 of Order 40 of the Code of Civil Procedure as amended by the Madras High Court itself provides that the court may, where the account is disputed by the parties and is of a complicated nature or where it is alleged that loss has occasioned to the property by the wilful default or gross negligence of the receiver, refer the parties to a suit, and the decision of the above Madras case is based on that rule. There is no such provision in that rule so far as this court is concerned. 6. Mr. Sinha, however has supported the propriety of the order of the Court below on a Bench decision of this court in Rang Bahadur Singh v; Biseshwar Prasad Singh AIR 1956 Pat. 429 . There is no such provision in that rule so far as this court is concerned. 6. Mr. Sinha, however has supported the propriety of the order of the Court below on a Bench decision of this court in Rang Bahadur Singh v; Biseshwar Prasad Singh AIR 1956 Pat. 429 . In that case Misra J. with whom Ahmad J. agreed after considering the various authorities on the subject, came to the conclusion that where a petition of objection to the passing of account, containing various allegations of misappropriation, negligence and wilful default on the part of a receiver and a prayer for an enquiry into those allegations is filed, a separate suit is not the only remedy but the matter can be investigated by the court who appointed the receiver in a summary proceeding. But his lordship further held that it may well be that when there are complicated questions of fact and the court in seisin of the case is satisfied that a summary enquiry like the one contemplated before it would not be fair it should direct the party applying to bring a regular suit against the receiver on the charge of misappropriation or fraudulent conversion. 7. On the authority of the above Bench decision of this court the order of the court below would have been justified if it had taken the view that it had jurisdiction to decide the question, but, in view of the complications raised, it will be proper to have the matter decided by a regular suit. The decision of the court below, however, is not to that effect, and the view taken by it is that such a matter could only be decided in a properly constituted suit and the court had no jurisdiction in that proceeding itself to decide the matter summarily. That view is obviously, wrong. 8. In this case, however, there is another difficulty in supporting the order of the learned Subordinate Judge. As already stated, the two civil revision applications, namely C. R. No 143 of 1955 and C. R. No. 144 of 1955, were disposed of by consent of the parties in which one of the terms was that the question of liability against judgment debtor No. 7 had to be decided by the court itself. As already stated, the two civil revision applications, namely C. R. No 143 of 1955 and C. R. No. 144 of 1955, were disposed of by consent of the parties in which one of the terms was that the question of liability against judgment debtor No. 7 had to be decided by the court itself. The words "court itself" are very important and in my opinion, mean the court which appointed the receiver and not a court before whom a properly constituted suit may have to be filed. The word "court" in this consent order has been in my opinion, used precisely having the same meaning as the word court has Been used in Rule 4 of Order 40, that is to say, the court which appointed the receiver. In view of this consent order, the court below had no option to decide the liability of the receiver in the proceeding itself and should not have referred the parties to a separate suit. Mr. Sinha has, however, contended that by agreement of the parties the court could not be forced to decide the matter, but in the present case it is not only the agreement between the parties under which the court has to decide this matter but the court has to deal with the matter on an agreement superadded with the command of this court by passing a consent order. The court below thus had to deal with the matter in view of the order of this court, though passed by consent of the parties. The court below has not at all considered and given effect to this consent order. In view of the above consent order, the parties were bound by their agreement and the court was bound by the order of this court as regards the decision of the liability of the receiver for his wilful default and gross negligence. 9. The result, therefore, is that the civil revision application succeeds and is allowed with costs; the order of the court below refusing to determine the question of the liability of the receiver is set aside and the case is sent back to it for fresh decision of the question on merit in accordance with law. Hearing fee Rs. 100/-. The miscellaneous appeal as already stated, is dismissed, but without any costs. V.Ramaswami, J. 10 I agree.