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2012 DIGILAW 106 (MP)

Prithvi Raj Sarin v. Ramesh Kumar Sachdeva

2012-01-23

SHEEL NAGU

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JUDGMENT ( 1. ) THIS miscellaneous appeal under Order XLIII, Rule 1(s) Civil Procedure Code assails the interlocutory order dated 25-1-2010 passed in Case No. 130-A/2009 (Old No. 7-A/1978) by IV Additional Judge to the Court of District Judge, Gwalior, whereby an application preferred by the plaintiff/ Misc. appellant for appointment of an independent Receiver in the backdrop of the objection to the working of erstwhile Receiver Late Harbans Lal Sachdeva (defendant No. 1) and further expressing apprehension that in case son of late Harbans Lal Sachdeva (defendant No.1) is appointed as Receiver then the property in dispute will be put to misuse, has been disposed of by appointing Ramesh Kumar Sachdeva (defendant No. 2) son of late Harbans Lal Sachdeva (defendant No. 1) as Receiver. ( 2. ) THE primary ground of challenge to the above said interlocutory order is that once the opposite party alleges misconduct on the part of the erstwhile deceased Receiver, the name of son of erstwhile Receiver ought not to have been accepted for appointment of Receiver. ( 3. ) INSTANT case involves chequered history which for the sake of convenience is detailed below in a chronological manner :-_ Date__Events_ 24- 8-1976 III Additional District Judge, Gwalior appoints the Manager of the partnership firm as Receiver._ 7-9-1976 The order of appointment of Receiver dated 24-8- 1976 is confirmed by the Court._ 25- 11-1976 The High Court, Gwalior Bench in M. A. No. 97/1976 set-aside the order dated 24-8-1976 and instead appoints late Harbans Lal Sachdeva (defendant No. 1) as Receiver on furnishing security of RS.75,000/- 6-5-1978 III Additional District Judge, Gwalior rejected plaintiffs application for removal of the Receiver Harbans Lal Sachdeva (defendant No. 1)._ 24-8-1979 High Court Bench Gwalior in MFA No. 111/1978 preferred against the order dated 6-5-1978, disposed of the said MFA No. 111/1978 with the consent of both the parties, by permitting appointment of chartered accountant for carrying out the audit of the entire account of Receiver for discovering the irregularities if any in the maintenance of the account of the firm by the Receiver along with nature of the irregularities. The Court further directs that after passing of the preliminary decree if the reason for continuing keeping of property in the custody of the Receiver exists, the trial Court may consider the question of removal of the present Receiver and appoint another one, in light of the report of Chartered Accountant reserving the right to ascertain the liability of the Receiver which may be established on the strength of the report of Chartered Accountant._ Consequentially The Chartered Accountant Mr. P. D. Garg is 15-10-1979 appointed as Auditor. Preliminary decree is passed by III ADJ, Gwalior with a direction to complete entire exercise before 10-4-1980 for enabling the Court to pass final decree._ 23-12-2002 VIII Additional District Judge, Gwalior directs Chartered Accountant Mr. Garg to conduct audit for a period from 31-8-1974 to 15-2-1975 for which the Receiver Harbans Lal Sachdeva (defendant No. 1) if directed to make available all records to Chartered Accountant._ 23-1-2003 The Additional District Judge, rejected an application for review of the order dated 23-12-2002._ W. P. No. 737/2003 Filed to assail the order dated 23-1-2003. under Article 226 of the Constitution of India. 30-11-2004_ W.P. No. 737/2003 is decided. Civil Appeal No.(s) Filed by the appellant therein against the order 1740/2008 dated 30-11-2004, seeking proper implementation of Preliminary decree dated 15-10-1979._ 12-8-2007 Receiver Harbans Lal Sachdeva (defendant No. 1) dies._ 20-5-2009 The Apex Court disposes of C.A. No. 1740/2008 without commenting on the merits of the case by directing the trial Court to pass appropriate orders for appointment of new Receiver in place of deceased Receiver Harbans Lal Sachdeva (defendant No. 1) as expeditiously as possible preferably within a period of two months from today. The Apex Court further directs that after the new Receiver is appointed he shall be given custody of all records and accounts of the firm to enable the auditor to carry out audit in terms of the Preliminary decree dated 15-10-1979 and submit report in that regard to enable the trial Court to pass a final decree after hearing the rival parties._ 25-1-2010 The trial Court (IV Additional District Judge, Gwalior) after considering the application for appointment of new Receiver after hearing the rival parties, appointed Mr. Ramesh Kumar Sachdeva defendant No. 2 [(son of late Harbans Lal Sachdeva (defendant No. 1)] as Receiver for submitting his report latest by 31-1-2010 to enable the trial Court to pass a final decree._ ( 4. ) LEARNED counsel for appellants has primarily contended thus :- (a) That the impugned order is contrary to the directions passed by the Apex Court on 20-5-2009 in Civil Appeal No. 1040/2008. (b) That despite raising of serious allegation of misconduct against the erstwhile deceased Receiver and as well as Ramesh Kumar Sachdeva (newly appointed Receiver) the impugned order appointing Ramesh Kumar Sachdeva has been passed. (c) That the impugned order appointing Ramesh Kumar Sachdeva as Receiver is not inconformity with the provisions of Order XL, Rule 1, Civil Procedure Code. ( 5. ) LEARNED counsel for respondents on the other hand has defended the impugned order stating that the Court below has rightly appointed Ramesh Kumar Sachdeva as new Receiver as the appellant had failed to prove any case of misconduct against the defendant No. 2 and therefore, no prejudice could be caused to either parties to the litigation by the said appointment. LEARNED counsel for respondents further states that the order of Apex Court did not deal with the case on merits and therefore, the question of violation of directions of Apex Court by the Courts below does not arise. ( 6. ) LEARNED counsel for appellants has relied upon the case Radha Kanta Pal vs. Benode Behari Pal and others, AIR 1934 (Cal.) 444 and Devi Textiles and others vs. S. Suganthi, AIR 2000 (Mad.) 62 . In support of his contention that the party to the suit should not be appointed as Receiver to look after the subject- matter of the same case in which he is a party. ( 7. ) AFTER hearing counsel for rival parties it would be appropriate to reproduce the decision rendered by this Court on 24-8-1979 in MFA No. 111/1978 which is as under :- "24-3-1979 Shri B. G. Apte Advocate for the appellants and Shri J. K. Anand Advocate for the respondents No. 1 and 2. both the counsel heard on - Misc. appeal. Order dictated in open Court, signed and dated. both the counsel heard on - Misc. appeal. Order dictated in open Court, signed and dated. ORDER AFTER hearing the learned counsel from both the sides and on going through the material on record, this Court is of the opinion that the following------to which both the parties also agree, will-----interest of both the sides. Most of the allegations put forth for seeking removal of the present receiver, who happened to be the defendant himself, are that the accounts furnished by him were not genuine, correct and proper. Allegations of withdrawals of huge amount for no rhyme or reason and - an concealment of income and-----not supported by vouchers, were also made. It was also-----that the accounts were not submitted under the signature of the Receiver himself. Sometimes, some other person had signed the same as receiver and sometimes they were under the signature of the lawyer of the receiver. Shri Anand Advocate for the respondent Nos.1 and 2 stated that whatever accounts have been submitted either under the signature of the lawyer or somebody else, the receiver-----the same because according to him, (hey are the actual correct accounts. Under these circumstances, the following directions are made :- (1) That the Court before proceeding to deliver the judgment shall at least appoint any chartered Accountants out of the list of approved chartered be available for carrying out the audit of the entire accounts of the receiver. The auditor shall be asked to make a thorough scrutiny of all the items of credit and debit entries and submit a detailed audit report disclosing the irregularities, if any, and their nature. The parties shall appear before the trial Court on Monday the 27th August, 1979 and the Trial Court shall make necessary-----regarding appointment of the chartered accountant. The Chartered Accountant will be entitled to remuneration according to rules, if any, providing for the same or as may be found reasonable. This payment of remuneration will be treated as business expenses. The trial Court shall ask the Chartered Accountant to submit his report within 2 months as far as possible or within such further reasonable time as may be extended by the Court below. This payment of remuneration will be treated as business expenses. The trial Court shall ask the Chartered Accountant to submit his report within 2 months as far as possible or within such further reasonable time as may be extended by the Court below. (2) If either by virtue of the final judgment, which may be delivered in the suit or for any other reason occasion for continuing the receiver of the property remains, and it becomes necessary to continue to keep the property in the custody of the receiver, the trial Court, even after passing the preliminary decree, will be seized of the jurisdiction to consider the question of removal of the present receiver and appointment of any other one in his place if the light of the report of the Chartered Accountant. If it is found that the present receiver has done serious irregularities or, that looking to the nature of defaults, if any committed by him, it was not desirable to continue him as the receiver, the trial Court will be free to - necessary orders directing removal of the present receiver and appointment of another receiver. If it is found that the defendant No. 1 is -----the charge, then also, the trial Court-------question of liability of the receiver in the light of the report of the Chartered Accountant. AFTER making an order for appointment-----Receiver and obtaining the inventory which has been directed to be got prepared by Shri-----in pursuance of the order made by this-----Court in the connected 1978 today, the trial Court may deliver the judgment because then the order made-----by this Court staying the delivery of judgment shall come to an end. Since this appeal is being disposed of on-----the agreed basis, as referred above, there will be no order as to costs. The parties will bear their own costs of this appeal. The record of the trial Court be sent back without any loss of time." ( 8. ) IN the above said order dated 24-8-1979, it is pertinent to mention that the said order had been passed with the consent of both the parties and the directions No. 2 is relevant for the dispute involved in this case as it pertains to the rights and liabilities of the parties and the directions given in that regard by this Court to the trial Court for removal of the erstwhile Receiver. The said direction contained in clause 2 directs the trial Court to consider the question of removal of erstwhile Receiver and appoint a new one only after receipt and in the light of the report of Chartered Accountant which was appointed for conduction of audit of the account of the partnership firm. ( 9. ) IT is an undisputed fact that the Chartered Accountant has not yet submitted his audit report and therefore, the question of appointment of fresh Receiver has not yet arrived. ( 10. ) THE Apex Court while disposing of Civil Appeal No. 1740/2008 without commenting upon the merits of the case was of the opinion that since the issue merely pertains to proper implementation of preliminary decree dated 15-10-1979 for which the appointment of fresh Receiver is necessary, directed that new Receiver in place of the deceased Receiver be appointed by the trial Court so that the books and accounts of dissolve partnership firm could be made available to the auditor for completion of process of audit and submission of report thereof to achieve the ultimate goal of passing the final decree by the trial Court. ( 11. ) IN the background of the abovesaid factual matrix culminating in passing of the direction by the Apex Court in the Civil Appeal No. 1740/2008, the trial Court has passed the impugned order dated 25-1-2010, whereby the defendant No. 2 Ramesh Kumar Sachdeva (son of erstwhile Receiver Late Harbans Lal Sachdeva) has been appointed as new Receiver. ( 12. ) PERUSAL of the impugned order indicates that the trial Court before passing the impugned order considered the application filed by the plaintiff wherein objection had been made in regard to appointment of Swadesh, Harish or Ashok (son of late Harbans Lal Sachdeva defendant No. 1 erstwhile Receiver) on the ground that their appointment as Receiver would further prejudice the case and result in defalcation of suit property. On the other hand the respondents while replying to the above said request of the plaintiffs denied the allegations by stating that no malpractice fraud or defalcation has been committed by late Harbans Lal Sachdeva (defendant No. 1 the erstwhile Receiver) and the appointment of any of the sons of late Harbans Lal Sachdeva defendant No. 1 erstwhile Receiver would not prejudice the case of either of the parties. After considering the rival contentions in regard to appointment of fresh Receiver the Court below found that none of the allegation have been found proved. The Court below was further of the view that adequate checks and balance have been provided in the system for taking appropriate action as and when the Receiver is found to be prima-facie guilty of misconduct. The trial Court lastly found that suit property was in possession of defendant No. 1 and 2. The Court below thus came to the conclusion that appointment of the defendant No. 2 as the new Receiver would be appropriate. ( 13. ) TURNING now from the factual to legal aspect, it is noteworthy that the provisions for appointment of Receiver are contained in Order XL of Civil Procedure Code which vests the Court with wide powers while appointing a Receiver without circumscribing the exercise of this power by any condition except that the Court feels "just and convenient". Rule 2 of Order XL of Civil Procedure Code pertains to remuneration whereas Rules 3 and 4 pertain to duties and enforcement of Receiver's duties. Clause (d) of Rule 3 holds the Receiver responsible for any loss occasioned to the property by his wilful default of gross negligence, whereas on the other hand Rule 4 provides that in case the Receiver fails in his duties and occasions loss to the property by wilful default and/or gross negligence, the loss so caused can be recovered by liquidating his personal property. ( 14. ) FROM the abovesaid statutory provisions, it is crystal clear that while providing powers to appoint Receiver and vesting him with certain powers and duties, the Court is very well equipped with ample amount of jurisdiction to exercise its penal powers to make good the loss caused by the Receiver due to failure to discharge his duties or by occasion of loss to the property by wilful default or gross negligence. ( 15. ) TESTED on the anvil of the abovesaid provision of Order XL, Civil Procedure Code the impugned order appears to be just and reasonable. ( 16. ( 15. ) TESTED on the anvil of the abovesaid provision of Order XL, Civil Procedure Code the impugned order appears to be just and reasonable. ( 16. ) IT is also to be seen from the record that so far as the defendant No. 2/new Receiver is concerned there have been no allegation against him of negligence or misconduct or failure to discharge duties obviously for the reasons that he had never been earlier appointed as Receiver and it is now for the first time that by the impugned order defendant No. 2 has been appointed as Receiver inter alia on the ground that the defendant No. 2 is in possession of the property. ( 17. ) THE apprehension in the mind of the plaintiff about the failure of new Receiver to discharge his duties in a proper manner is understandable. THE new Receiver is a party to the litigation and therefore apprehension of the plaintiff may be well founded but is not enough to compel this Court to direct for change of Receiver for the reasons enumerated infra. ( 18. ) AS regards the reliance placed by learned counsel for appellants on the decisions in the cases of Radha Kanta Pal vs. Benode Behari Pal and others, AIR 1934 (Cal.) 444 and Devi Textiles and others vs. S. Suganthi, AIR 2000 (Mad.) 62 are concerned, it is to be seen that in both these cases it has been held that in normal circumstances parties to the suit or one of the partners in partnership firm should not be made Receiver to manage the affairs of the partnership firm, unless the other parties agree to the same. The said decisions cited by the learned counsel for appellants are distinguishable on facts because in the instant case the appointment of Receiver is not for management of the business of the partnership but only for furnishing the necessary accounts to the Auditor (Chartered Accountant) to enable him to submit his report to the Court for passing the final decree in the matter. ( 19. ) THERE is another aspect which deserves serious consideration in this case which is the fact of this litigation being protracted for having commenced in 1976 in shape of Civil Suit No. 175-A/1976, for rendition of accounts of the partnership firm and continues till date. ( 19. ) THERE is another aspect which deserves serious consideration in this case which is the fact of this litigation being protracted for having commenced in 1976 in shape of Civil Suit No. 175-A/1976, for rendition of accounts of the partnership firm and continues till date. It is now more than 35 years since when the said Civil Suit is pending in which the Final decree has yet to be passed. Thus it is not only in the interest of justice and expediency but also to prevent loss of faith of the litigant in the judicial system that the suit deserves to be concluded as early as possible without any further delay. ( 20. ) THIS Court thus is conscious of the fact that interfering with the impugned order at this stage will further delay the proceedings in the civil suit, which are pending since more than 35 years and therefore, this Court holds that the apprehension, that the plaintiffs may have in their mind regarding the impartiality of new Receiver is heavily outweighed by the possibility of the litigant loosing faith in the judicial system due to this litigation being pending since last 35 years. ( 21. ) ACCORDINGLY, this Court upholds the impugned order and rejects this miscellaneous appeal as being devoid of merit, with the hope and expectation that the civil suit will finally stand concluded at an early date. Appeal dismissed.