Kailash Pati Sugar Industries Kapsenda, Tilhar v. Kamla Gupta
1989-04-03
B.L.YADAV, K.C.AGRAWAL
body1989
DigiLaw.ai
JUDGMENT B. L. Yadav, J. 1. These two appeals by defendants are directed against the same order dated 21-11-1988 passed by the Civil Judge, Shahjahanpur, allowing the application no. 6 Ga of the plaintiff respondent no. 1 Smt. Kamla Gupta, wife of Sri Basdev Gupta, for grant of temporary injunction and application no. 28 Ga for appointment of Receiver in a suit filed by plaintiff respondent no. 1 for permanent injunction restraining the defendants from interfering with the joint possession, control and management of the firm Parag Sugar Factory, a partnership firm, having its plant at village Kapsenda, district Shahjahanpur and for dissolution of the firm and for accounts, on the allegations that the firm was carrying on the business of sugar manufacturing, and on the death of Smt. Parag Devi, the firm was not to be dissolved, rather her legal representatives defendant nos. 3, 5 and 6 being her sons, became partners. There was a heavy liability of loan (i.e. about four lacs) of the Allahabad Bank, Shahjahanpur and the firm was unable to pay the same. Defendant no. 2 Sri Kavindra Goel (the present appellant in Appeal no. 1089) who was an active partner of the firm, promised to pay the loan of the Bank amounting to Rs. 4 lacs and pay other liabilities excluding the sales tax etc., and under that assurance he got the signature of the plaintiff on the so called deed of dissolution dated 10-9-1986, which was at the best an agreement to dissolve the firm. The Allahabad Bank has filed a suit for recovery of its huge dues of about Rs. 5 lacs against the plaintiff and defendants as the amount promised by defendant no. 2 Ravindra Goel could not be paid rather he has misappropriated the assets of the firm. Hence in view of clause VII of the alleged deed of dissolution of the firm (Annexure 1 to the affidavit) the assets of the firm were to be taken back from party no. 4 Ravindra Goel, defendant no. 2 to the suit and the same would become the property of the partnership firm. In this way the partnership firm continues and the alleged deed of dissolution of the firm was totally ineffective. 2. The application for grant of temporary injunction and for appointment of Receiver was filed on the allegation that the plaintiff was in possession but the defendant no.
In this way the partnership firm continues and the alleged deed of dissolution of the firm was totally ineffective. 2. The application for grant of temporary injunction and for appointment of Receiver was filed on the allegation that the plaintiff was in possession but the defendant no. 2 was threatening to dispose of the property to M/.s. Kailash Pati Sugar Industries, the appellant in appeal no. 1088 of 1988 (who was not made party in the suit of the plaintiff respondent in Appeal no. 1089 of 1988) and that the assets of the firm were being mismanaged, there was no accounting maintained by defendant no. 2 and that as the assets were mismanaged, damaged and tried to be alienated, hence the temporary injunction may be granted restraining the defendants including opposite party no. 2 from interfering with peaceful possession of the plaintiff respondent no. 1 (in F. A. F. O. no. 1089 of 1988), and a Receiver, preferably an Advocate, may be appointed. The aforesaid application for grant of temporary injunction and appointment of Receiver were contested by defendant no. 2, who filed objection supported by an affidavit that even though suit no. 82/86 of 1986 was filed by Allahabad Bank against the Parag Sugar Factory and others for the recovery of the amount due from the defendants to the Bank, but as the defendant no. 2 Sri Ravindra Goel has paid the entire amount due to the Bank, consequently the Bank itself made an application that as after the accounting the amount due to the tune of Rs. 3,80,000/- has been paid to the Bank by Sri Ravindra Goel, the suit may be dismissed. The said suit was, however, dismissed on 4-11-1988, and that the sale deed has already been executed on 30-8-1988 in favour of M/s. Kailash Pati Sugar Industries and out of sale consideration from that sale deed the liability of the Bank was cleared and other liabilities were also paid. Even the Sales Tax Officer has issued a certificate that there were no outstanding dues of the sales tax arrears against the Parag Sugar Industries and a certificate to that effect dated 11-5- 1988 was issued (Annexure-6 to the affidavit in F. A. F. O. no. 1089 of 1988).
Even the Sales Tax Officer has issued a certificate that there were no outstanding dues of the sales tax arrears against the Parag Sugar Industries and a certificate to that effect dated 11-5- 1988 was issued (Annexure-6 to the affidavit in F. A. F. O. no. 1089 of 1988). Similarly the entire dues against the said partnership firm were paid in pursuance of the contents of the deed of dissolution dated 10-9-1986, particularly para 2 thereof, which is quoted below :- "That the party no. 4 (defendant no. 2) will alone be responsible to pay off the entire liabilities of Bank, Government and third parties including the interest thereon upto the date till the business are paid off and no other remaining parties 1 to 3 will be liable for the payment of any sort of liability of the partnership." 3. In view of para 5 of the deed, as the defendant no. 2 Ravindra Goel has paid the entire amount due to the Bank, Government dues and to the third parties, consequently, the present appellant was to have control over the business, plant and machinery, fittings and fixtures, to use the same in any way he likes and party nos. 1 to 3 will not cause any hindrance. The contents of paras 5 and 6 of the deed of dissolution are set out below : "5. That the party no. 4 shall have complete control over the business plant and machinery fittings and fixtures of the unit aforesaid and he shall be free to use the same in whatsoever manner he likes and the remaining parties nos. 1 to 3 will not cause any hindrance in running the aforesaid unit by the party no. 4. After liquidation of all liabilities party no. 4 shall have absolute ownership of the land, building, machinery, fittings and fixtures. If the Allahabad Bank, Govindganj, Shahjahanpur discharges the party nos. 1 to 3 from the Bank liabilities, party no. 4 shall become absolute owner from the day the bank discharges. 6. That parties Nos. 1 to 3 shall not be liable to pay any debt or loan due against the partnership firm including the loan of Allahabad Bank." 4.
If the Allahabad Bank, Govindganj, Shahjahanpur discharges the party nos. 1 to 3 from the Bank liabilities, party no. 4 shall become absolute owner from the day the bank discharges. 6. That parties Nos. 1 to 3 shall not be liable to pay any debt or loan due against the partnership firm including the loan of Allahabad Bank." 4. Sri Ranjeet Saxena, learned counsel for the appellant urged that no prima facie case, balance of convenience or irreparable loss was made out, nor under the facts and circumstances of the case it was just and convenient to appoint the Receiver under Order 40 (forty) Rule 1 of the Code of Civil Procedure, 1908 (for short the Code). The entire amount due to the Bank was paid by defendant no. 2, party no. 4 to the deed of dissolution of the firm and the present appellant in F. A. F. O. no. 1089 of 1988 and the other dues including dues of the sales tax etc. as was obvious from the certificate of no dues. Consequently the present appellant Ravindra Goel became absolute owner of the entire assets of the firm and he was entitled to execute the sale deed. Consequently, he executed the sale deed in favour of the appellant (in F. A. F. O. no. 1088 of 1988) who was not even made party in the suit filed by Kailash Pati Sugar Industries. Hence even the order for appointment of Receiver or the grant of temporary injunction was not binding on him nor he was effected by the same, but for the sake of precaution he has also filed an appeal as indicated above. As the present appellant Ravindra Goel has undertaken to repay the entire dues to the Allahabad Bank and other Government dues and dues to third parties, consequently he took it seriously and even though there might be some order to the contrary without his knowledge, he has executed the sale deed in favour of Kailash Pati Sugar Industries on 17-8-1988. A true copy of the same has been filed as Annexure-3 to the affidavit in F. A. F. O. no 1088 of 1988.
A true copy of the same has been filed as Annexure-3 to the affidavit in F. A. F. O. no 1088 of 1988. Neither the plaintiff nor the other partners in view of the deed of dissolution or otherwise are in possession over any asset of the firm and they are bound by the terms of the deed of dissolution of partnership firm as quoted above and the defendant appellant Ravindra Goel became the absolute owner and the sale deed executed by him in favour of other appellant Kailash Pati Sugar Industries was legal as the plaintiff was not in possession nor has any title in view of the deed of dissolution of the partnership firm. Hence the application for temporary injunction or for the appointment of Receiver was not maintainable and no relief can be granted and the learned Civil Judge has erroneously allowed those applications. Learned counsel for the respondents, on the other hand, urged that as the sale deed was executed in favour of Kailash Pati Sugar Industries inspite of restraint order, hence that was not legal. As the suit was filed by the Allahabad Bank for recovery of the amount due against the firm, hence it has to be taken that the terms of the deed of dissolution of the firm were not complete and hence he could not claim ownership over the assets of the firm and he has no right to execute the sale deed in favour of Kailash Pati Sugar Industries. As the prima facie case, balance of convenience and irreparable loss was proved and it appeared just and convenient to the learned Civil Judge, hence the application for grant of temporary injunction has been allowed and Sri Shanti Saran Srivastava, Senior Advocate, has been appointed Receiver. No ground, therefore, has been made out for interference by this Court. 5. Having heard the learned counsel for the parties, the points that fall for our determination are as to whether under the circumstances of the case, in view of the Order 39 Rules 1 and 2 of the Code temporary injunction could have been granted, or in view of Order 40 rule 1 Receiver could have been appointed. As regards the grant of temporary injunction as the averments in the application for appointment of Receiver were that defendant no.
As regards the grant of temporary injunction as the averments in the application for appointment of Receiver were that defendant no. 2 Ravindra Goel was making sincere efforts to alienate the assets of the firm so that the firm may be rendered without any asset and as he has not paid arrears of dues either to the Allahabad Bank or to other Government authorities, consequently, he could not become the sole proprietor of the assets of the firm to the exclusion of other partners in pursuance of the deed of dissolution. The provision of Rule 1 (a) of Order 39 of the Code is that when in any suit it is proved by an affidavit or otherwise that the property in suit is in danger of being wasted, damaged or alienated by any party to the suit, a temporary injunction may be granted. It is well known that Judges are the only mouths that pronounce the words of law......... In Osborne v. Bank of U. S., 9 Weat 738, it has been held by Justice Marshall that judicial power is never exercised for the purpose of giving effect to the will of the Judge ; rather it is for the purpose of giving effect of the will of the legislature, in other words, the will of law. As the provision of Rule 1 are couched in a simple language, it has to be interpreted according to the simple rule of grammer. The provision is that in case any property in dispute is in danger of being wasted, damaged or alienated or the defendant threatens to dispossess the plaintiff, a temporary injunction can be granted. It has been crystallized by a number of judicial decisions that in order to grant temporary injunction it must be proved that there is a prima facie case, balance of convenience made out in favour of the plaintiff and he has sufferred irreparable loss and that the plaintiff was in possession over the property in dispute on the date of suit. (See Bruce v. Silva Raj, 1987 Supp. SCC 161). 6. In Terene Traders v. Ramesh Chand Jamunadas and Co., AIR 1987 SC 1492 the learned single Judge of the High Court dealing with the revision, observed that even though respondent no. 1 Ramesh Chand Jamunadas and Co.
(See Bruce v. Silva Raj, 1987 Supp. SCC 161). 6. In Terene Traders v. Ramesh Chand Jamunadas and Co., AIR 1987 SC 1492 the learned single Judge of the High Court dealing with the revision, observed that even though respondent no. 1 Ramesh Chand Jamunadas and Co. was not doing business for sometimes because of financial hardship and was not in khas possession, but that was not a ground on which it can be denied. Consequently the temporary injunction was granted. The Supreme Court under para 3 (page 1492) observed as follows : "The city civil court on a careful consideration of the evidence came to a definite conclusion that the plaintiff respondent no. 1 was not in possession of any portion of the suit premises on the date of the institution of suit. Even the learned single Judge has not come to a different conclusion as he observes that the plaintiff was not in khas possession. There was no occasion for the High Court to have granted temporary injunction." In the instant case on the own showing of the plaintiff Smt. Kamla Gupta, as under the deed of dissolution of the partnership, Ravindra Goel, defendant no. 2, the appellant in F.A.F.O. No. 1089 of 1988 was to pay the entire amount due to the Bank, about Rs. 4 lacs and other dues of the Government department and third parties were also to be paid by him and in case he paid the same, he would become absolute owner. Even though the suit for recovery of the said amount was filed by the Allahabad Bank, but ultimately Sri Ravindra Goel did pay the amount of Rs. 3,80,000/- to the Allahabad Bank in suit No. 82/86 of 1986 (Allahabad Bank v. Parag Sugar Factory). As the said amount was paid, the suit was dismissed on 4-11-88. Similarly, a certificate of no dues dated 11-5-88 (Annexure 6 to the affidavit) has also been filed showing that there was no sales tax dues against the firm. Similarly there was no other dues payable by the firm. In this view of the matter, neither the plaintiff was in possession, as after making payment of dues to the Bank and other dues, Sri Ravindra Goel, defendant no.
Similarly there was no other dues payable by the firm. In this view of the matter, neither the plaintiff was in possession, as after making payment of dues to the Bank and other dues, Sri Ravindra Goel, defendant no. 2 and the appellant in F. A. F. O. No. 1089 of 1988 became owner of the assets of the firm and he had executed a sale deed in favour of Kailash Pati Sugar Industries, may be in ignorance of the some order of restraint. But the fact remains that the entire amount due to the Bank and other dues have been paid by the defendant appellant in pursuance of the deed of dissolution dated 10-9-86 and the sale deed has been executed by the appellant. Neither the plaintiff respondent was in possession nor she has any title as the terms of the deed of dissolution became operative against her, she has put her signature, as was obvious from the copy of deed filed along with affidavit and she was bound by the same. Under these circumstances, there was no justification to grant temporary injunction to the plaintiff, particularly, when she was not in possession nor even prima facie case, balance of convenience or irreparable loss was made out in her favour 7. As regards the second point, even though emanating from the first one, whether in view of the language employed by the Parliament under Order 40 Rule 1 of the Code the Receiver could have been appointed. The provision is where it appears to the Court to be just and convenient, the Court may, by order, appoint a Receiver of the property. The words 'just and convenient' give a wide discretion to the Court. 8. In Kalyan Mills Co. Ltd. v. Union of India, AIR 1987 SC 371 where the principles for appointment of Receiver were in question, and the Receiver has been appointed in a case where the petitioner and respondent no. 2 both were the public limited Company and the later was the assessee Company, and the Union of India had to recover a sum of Rs. more than a lac from the said assessee Company on account of arrears of income tax.
2 both were the public limited Company and the later was the assessee Company, and the Union of India had to recover a sum of Rs. more than a lac from the said assessee Company on account of arrears of income tax. The Union of India filed a suit for recovery of the said amount and the suit was decreed for the appointment of Receiver, and the points urged on behalf of the appellant Company did not find favour with the Supreme Court and the appeal was dismissed holding that under the circumstances of the case the appointment of Receiver was correct as the same was obviously just and convenient, otherwise recovery of arrears of the tax due against the appellant Company cannot be made by the Union of India. In the present case, as the Kailashpati Sugar Industries, the appellant in F.A.F.O- No. 1088 of 1988 has already purchased the assets of the firm in view of the sale deed and was in possession thereof from the date of sale and in pursuance of the deed of dissolution referred to above, except defendant no- 2 Ravindra Goel, the present appellant in F. A. F. O. No. 1089 of 1988, no other partner was to make payment of arrears of dues to the Allahabad Bank or other dues of the Government authorities or third party. As Sri Ravindra Goel paid the same, he became absolute owner and no other person including the plaintiff' respondent Smt. Kamla Gupta was to have any right, title or interest. Sri Ravindra Goel having paid the said amount to the Bank and also the Sales Tax and other dues and having discharged the other liabilities to the third parties, he became the absolute owner. Having executed the sale deed, the vendee Kailashpati Sugar Industries entered into possession and from the evidence available on record and having heard the learned counsel for the parties, we are satisfied that it is only the Kailashpati Sugar Industries which is in possession over the assets of the firm. Under these circumstances, it could never be just and convenient to appoint Sri Shanti Saran Srivastava, a senior Advocate to be the Receiver to preserve the properties or to enhance its value, rather he would be interested in maintaining the accounts just as a Receiver.
Under these circumstances, it could never be just and convenient to appoint Sri Shanti Saran Srivastava, a senior Advocate to be the Receiver to preserve the properties or to enhance its value, rather he would be interested in maintaining the accounts just as a Receiver. As the plaintiff was not in possession, there is no justification to appoint Receiver on the application of the plaintiff respondent. One more aspect which is required to be emphasised is that the Civil Judge in this case does not appear to be aware about the duties of a Receiver under Order 40 Rule 1 of the Code, inasmuch as the Receiver acts as an agent of the Court and he preserves the property as if any party to the suit could have preserved and keeps it either in the similar form or tries to improve the same till the disposal of the suit. The Civil Judge has taken a very unique view which we do not approve that Receiver was directed to prepare an inventory and to keep the same in his office. But thereafter he (the Receiver) was also given power to make sale of the movable and immovable properties of the firm by deducting the amount which could be spent in making sale of the property and he was to deposit the said amount in his own name in the. State Bank of India and that no party to the suit would create any interference in the functioning of the Receiver. In this way, the Receiver has been given a full fledged power to transfer the assets of the firm at his sweet will. In this way the entire property would be sold by the said Receiver without any control or supervision of either of the parties. This arbitrary power given to the Receiver to make sale of the properties of the firm was totally unjustified, particularly when Sri Ravindra Goel, defendant no. 2 has made the payment of a sum of about Rs. four lacs to the Bank and similarly has discharged other liabilities against the firm. The Civil Judge has completely ignored the relevant aspects to be taken into consideration while making an order for the appointment of Receiver and the powers that may be given to him. 9.
2 has made the payment of a sum of about Rs. four lacs to the Bank and similarly has discharged other liabilities against the firm. The Civil Judge has completely ignored the relevant aspects to be taken into consideration while making an order for the appointment of Receiver and the powers that may be given to him. 9. We are conscious that normally Receiver must be a third person and not a party to the suit, but in certain cases a party to the suit can be appointed Receiver, provided the circumstances of the case justify the same. Under the circumstances of the present case, however, as the Kailashpati Sugar Industries (the appellant in F.A.F.O. no. 1088 of 1988) has been in possession and is interested in enhancing the assets of the erstwhile firm (as the same has already been dissolved by the deed of dissolution of the firm dated 10-9-1986), as i has spent a huge amount for the said purpose, it appears to us just and convenient that Kailashpati Sugar Industries through its partner Sri Rajiv Katiyar be appointment as Receiver. We, therefore, direct that Sri Rajiv Katiyar partner of the appellant firm, would maintain day to day account of the firm and would furnish the same before the Court after every two months. It would maintain the accounts in the name of Kailashpati Sugar Industrial Under the circumstances, however, we direct the Civil Judge to decide the suit within six months from the date a certified copy of this judgment is furnished before him. 10. In the result, these appeals succeed and are allowed. The impugned order dated 21-11-88 is set aside and Kailashpati Sugar Industries (the appellant in F.A.F.O. No. 1088 of 1988) through its partner Sri Rajiv Katiyar, is appointed as Receiver and he would maintain the accounts of the firm and furnish the same before the Court after every two months. Under the circumstances, however, we direct the Civil Judge to dispose of the suit within six months from the date a certified copy of this judgment is furnished before him. The interim stay, dt. 28-11-88 (in both the appeals) is hereby vacated. There shall be no order as to costs. Appeals allowed.