B. K. MADAPPA v. KARNATAKA BANK LTD. — 1986 DIGILAW 462 (KAR)

KULKARNI, J. ( 1 ) BOTH the advocates submitted that the matter itself may be heard finally on merits. Accordingly arguments are heard and the appeal is disposed of. ( 2 ) THIS is an appeal by the defendants against the order dated 17-114986 passed by the Civil judge, Kodagu at Madikeri in O. S. 23 of 1985, appointing a Receiver in respect of the crop in the mortgaged coffee growing properties. ( 3 ) THE plaintiff has filed the suit for recovery of the mortgage money from the defendants due under several mortgages. ( 4 ) THE defendants resisted the suit. ( 5 ) THE plaintiff filed an application under Order 40 Rule 1 of the Code of Civil Procedure requesting the Court to appoint a Receiver to pick the coffee seeds from the mortgaged properties. The said application was resisted by the defendants. ( 6 ) THE Trial Court ordered for appointment of an advocate as a Receiver. The defendants being aggrieved by the said order have come up with this appeal. ( 7 ) ACCORDING to the plaintiff, the principal amount lent under the various mortgages, comes to about six and odd lakhs of Rupees. Now the plaintiffs contended that along with interest the amount due from the defendants comes to about 24 lakhs of Rupees. ( 8 ) ACCORDING to the Learned Counsel Sri Visweswara for the appellants, there is no allegation of waste or damage mentioned in the application filed under Order 40 Rule 1 of the Code of Civil procedure. He referred me to pages 1540 and 1541 of Mulla's Code of Civil Procedure, thirteenth Edition. The extract on page 1540 reads as - -. "money suits.-- It has been held by the High Court of Madras that the Court can appoint under this rule a receiver before decree even in a suit of a simple money creditor if there are extraordinary grounds therefor. The practice in English Courts is not to appoint receiver in such a suit unless there is special equity as for example a lien over the property. And this has been followed in the decisions of the Indian Courts. When the suit has been decreed, then Section 51 applies and a receiver can be appointed in execution if it is just and convenient to do so. " This is not a simple suit for recovery of money. And this has been followed in the decisions of the Indian Courts. When the suit has been decreed, then Section 51 applies and a receiver can be appointed in execution if it is just and convenient to do so. " This is not a simple suit for recovery of money. It is a suit based on the mortgage. Mortgage always creates an interest in the property. This principle applies only in a case where no interest is created in the immovable property at all. Therefore the said Commentary will not be of any help to the appellants. ( 9 ) THEN he referred me to page 1541, which reads - " the Court has no jurisdiction to enforce satisfaction of a judgment-debt by appointing a receiver of the future earnings or has made a sum payable out of them, they cannot be prospectively impounded by any of his creditors by any ordinary process of execution, whether legal or equitable. " The very use of the words 'judgment debt' would indicate that it is a case which would relate to a stage after the passing of the decree in a money suit. It does not speak about a mortgage suit or a mortgage debt or the amount found due under the mortgages. Therefore, the said extract also will not be of any help to the appellants. ( 10 ) THE very same Author has stated on page 1538 as - " in a mortgagee's suit for foreclosure or sale, where the mortgagee is entitled to enter into possession on default in payment of the mortgage moneys, the mortgagee is entitled prima facie to an order for the appointment of a receiver. The mortgagee in possession also is entitled to the appointment of a receiver, notwithstanding that he has been paid all his interest and costs out of rents received by him while in possession, and that he has surplus rent in his hands. It was so held in Mason v. Westoby (1886) 32 Ch. D. 206, 208 and County of Gloucester Bank v. Rudry merthyr Co. , (1895) 1 Ch. 629. In that case Bacon, V. C. , said: "it is said that the appointment of a receiver will cause great expense to the mortgagors ; but that cannot be helped. The mortgagee acting in accordance with her strict right, enters into possession because she cannot get her interest. , (1895) 1 Ch. 629. In that case Bacon, V. C. , said: "it is said that the appointment of a receiver will cause great expense to the mortgagors ; but that cannot be helped. The mortgagee acting in accordance with her strict right, enters into possession because she cannot get her interest. As mortgagee in possession she becomes subject to heavy responsibilities, and from those responsibilities she is entitled to be relieved by the appointment of a receiver. She had, however, while in possession, received more than the amount of her interest and costs, but that surplus she must pay to the receiver. " The appointment of a receiver will be made almost as a matter of course in the case of an English mortgage on an application of the mortgagee if the interest payable under the mortgage is in arrears and the mortgagee is entitled to sell the property for default in payment of interest. If the interest is in arrears it may be just and convenient to appoint a receiver although the security is sufficient. " According to the plaintiff, it is an equitable mortgage akin to an English mortgage. Therefore, whenever the interest has fallen in arrears, the Court, as a matter of course, should appoint a receiver. ( 11 ) THE lower Court has also referred to Bai Fathubai Fiddli Lals v. Husufally Esmailjee Nagree, AIR1977 Bom 170 , which reads as - "now it is not really necessary for me to discuss the several authorities in greater detail because this High Court in Damodar v. Radhabai (A.. R. 1939 Bombay 54) supra clearly held that the fact of interest being in arrears, with something more, would be sufficient for the Court to exercise its discretion and appoint a receiver on the footing that it was just and convenient to do so. " The lower Court has also referred to K. S. Ethirajulu Chetty v. A. P. Rajagopalachari and ors. , air 1929 Madras 138 in support of the proposition that in a case of simple mortgage if there is any default in paying interest and the mortgaged properties falling in value, receiver should be appointed, although ordinarily, Courts would not deprive a simple mortgagor of possession. Similar view is also taken in Changanlal v. Ramanarayana, AIR 1956 Madhya Pradesh 244. Therefore,. Similar view is also taken in Changanlal v. Ramanarayana, AIR 1956 Madhya Pradesh 244. Therefore,. view of Mulla's commentary available on page 1538 of Thirteenth Edition and in view of the said case laws and in view of the fact that the interest has risen abnormally even to the extent of 18 lakhs, the Court in order to see that the interest of the mortgagee is not put in jeopardy, must appoint a receiver. ( 12 ) THE Learned Counsel Sri Visweswara submitted that they were cases where a receiver was appointed in respect of the mortgage property. According to him they do not contemplate a case of receiver being appointed in respect of crops. After all the crops come out of the estate only. When a receiver can be appointed in respect of the property, I think there should be no bar to appoint a receiver in respect of the crops also. Therefore, the said argument advanced by the learned Counsel Sri Visweswara fails. ( 13 ) SRI Visweswara then argued that the estate was scattered in five places and it would be impossible for a receiver to pick coffee seeds and it is quite likely that the value of the coffee seeds picked may be just sufficient to meet the expenses incurred by the receiver and the remuneration of the receiver. When the defendants have not chosen to pay even the interest, they cannot grumble that the value of the yield would be just sufficient to meet the remuneration of the receiver and the costs of picking up the coffee seeds. After meeting these expenses, whatever remains will be adjusted by the plaintiff towards the amount due under the mortgage. Therefore, this argument also fails. ( 14 ) THE Trial Court has referred to the reply sent by defendants 1 to 4 vide para 14 of the order passed by the Court below, It reads as - "though, the liability was only 6,54, 410-92 as on 1-12-1976, the same is now mounted up to approximately rupees Fifteen Lakhs (Rs. 15,00,000/-) on account of the exhorbitant interest you have been adding to the principal inspite of the incomes you derived from the Estate has been good in the beginning. " This itself would go to show that the defendants have not paid the interest. 15,00,000/-) on account of the exhorbitant interest you have been adding to the principal inspite of the incomes you derived from the Estate has been good in the beginning. " This itself would go to show that the defendants have not paid the interest. This is also a circumstance which would call for the appointment of a receiver in the case. ( 15 ) IN paragraph 4 of the Counter affidavit, the plaintiff has referred to the admissions of the defendants. It reads as.- "the crop from the suit schedule property was consigned to curers other than those to whom the coffee Board had issued instructions as the other curers are equipped with modern machinery and as such the curing will be better yielding better profits and they exercised the discretion with wisdom and in the best interest of the estate. They have not done the same with any fraudulent intention and the plaintiff Bank was aware of it. " This is a circumstance to show that the defendants, even inspite of the instructions of the Coffee board, entrusted the coffee seeds to some other curers and thus received the money themselves. This is also a circumstance to show that the defendants are out to appropriate the value of the coffee seeds for themselves to the exclusion of the mortgagee. ( 16 ) IN para 8 of the counter affidavit the plaintiff has referred to the undertaking given by the defendants, which reads as - "the above application was filed by the petitioners/plaintiff with the apprehension that the counter petitioners/defendants may misuse the coffee grown on the land. The counter petitioners/defendants bonafide submit the accounts of the coffee picked for the estate till to-day they have picked about 7 tonnes of coffee and further coffee is to be collected by way of gleaning. Further some Robusta coffee also to be picked. The counter-petitioners/defendants undertakes to deposit the value of the coffee picked and to be collected, after defraying the expenses. As the coffee is not yet dried up, it is prayed that 20 days time may be given to submit the final accounts. " Even inspite of such an undertaking, they do not appear to have paid any money to the plaintiff. This is also a circumstance, which would show the malafides of the defendants. As the coffee is not yet dried up, it is prayed that 20 days time may be given to submit the final accounts. " Even inspite of such an undertaking, they do not appear to have paid any money to the plaintiff. This is also a circumstance, which would show the malafides of the defendants. Therefore, this circumstance leans in favour of a receiver being appointed for picking up coffee seeds. ( 17 ) IT was urged for the defendants that the suit had been filed by the mother of the defendants and others for partition etc. That is no circumstance at all in the present case so long as the defendants do not dispute the mortgage executed by them in favour of the plaintiff bank. ( 18 ) SRI Holla has produced along with his counter affidavit xerox copies of the three letters written by the Coffee Board to the plaintiff Bank. The first one shows that the registered owner is one of the defendants namely B. K. Madappa ; the second one shows the name of B. K. Bopaiah as a registered owner and the third one shows the name of Mr. B. M. Bollayva as a registered owner. The said letters show that the, coffee seeds for the year 1986-87 are subject to the lien. When there is a lien over the crops even fort he year in question and when the assertions made by the defendants at this stage show want of bonafides on their part, the lower Court was justified in appointing a receiver. ( 19 ) THEREFORE, in the result, I do not find any merit in the appeal. It is dismissed. ( 20 ) SRI Holla wanted that it should be mentioned in the order that the interim order of stay granted in the appeal is vacated. When the appeal itself is dismissed, the interim order automatically stands vacated.