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Calcutta High Court
Shamal Dhone Dutt vs Lakhimoni Debi on 30 March, 1910
Equivalent citations: 6 Ind Cas 323
Bench: Mookerjee, Teunon


1. We are invited in this Rule to discharge an order made by the Court below in the course proceedings upon an application for an order (sic), on the basis of a decree nisi mae (sic) Court in the mortgage suit of (sic ) Dutt v. Lakshimoni Debi 36 (sic) Ind. Cas. 553. The suit to enforce the security was commenced on the 19th September 1905. On the 2nd February 1906, the plaintiff mortgagee applied for the appointment of a receiver, and on that date the Court decided that the estate could not meet the cost of a paid receiver and of his establishment. The plaintiff was not particularly anxious to be in possession as a receiver, and one of the defendants strongly opposed his appointment. But the Court was of opinion that the plaintiff would be a suitable person for appointment as receiver; he was thereupon nominated on condition that he should pay the expenses from the income, and deposit the balance in Court, to be available after final disposal of the case. On the-16th February, the nomination of the plaintiff as receiver was approved by the District Judge, and he was called upon to furnish security to the extent of Rs. 10,000. On the 20th February, the security was furnished, and the plaintiff was appointed receiver. On the 29th March 1907, the decree nisi was made by the Court of first instance. Upon appeal that decree was varied by this Court, on the 9th August, 1908. On the 24th July, 1909, the plaintiff applied to the Court below to have the decree nisi made absolute. One of the defendants objected on the ground that the plaintiff as receiver had money in his hands, which must be applied towards the satisfaction of the judgment-debt before the order absolute was passed. On the 2nd October 1909, the Subordinate Judge appointed a Commissioner to examine the accounts of the receiver and held that the order absolute should not be made till the accounts had been examined. The decree-holder thereupon obtained the Rule now under consideration, on the ground that he was entitled as a matter of right to an order absolute irrespective of the result of an enquiry into his accounts as receiver. This position has been strenuously contested on behalf of the judgment-debtor and we have further been invited by the learned Vakil for “the opposite party to discharge the Rule on two other grounds, namely, first, that the order made by the Court below, is a decree within the meaning of the “Civil Procedure Code” and appealable as such, secondly, that the entire proceedings in the Court below have been without jurisdiction as the only Court (sic) to entertain an application for order absolute, is this Court which made the decree nisi on appeal. Before we deal with the substantial question in controversy between the parties, it is necessary to examine briefly the two grounds urged by the judgment-debtor.

2. In so far as the first of these contentions is concerned there is, in our opinion, no foundation for it. The learned Vakil for the opposite party has placed reliance upon the case of Pramatha Chandra Roy v. Khethra Mohan Ghose 29 C. 651 to show that proceedings under Section 89 of the “Transfer of Property Act” are in continuation of the original suit, and an appeal from an order absolute made under that section, lies under the provision of Section 540 of the Code of 1882, as an appeal from an original decree. This principle, however, which was also adopted in the case of Bechoo Singh v. Bichharam Sahu 10 C.L.J. 91 : 7 Ind. Cas. 677, has no application to the circumstances of the present case. It may be conceded that if an application for order absolute is granted or refused, the-order is a decree within the meaning of the Code, and is appealable as such. But no order of this description has been made by the Court below up to the present stage. The Subordinate Judge has merely made an interlocutory order for the examination of the accounts of the receiver. Such an order can, in no sense, be treated as an adjudication of any right, claim or defence set up. It is clear, therefore, that there is no force in the contention that the remedy of the decree-holder was by way of an appeal, and not of an application for revision.

3. In so far as the second contention . is concerned, it is, in our opinion, equally groundless. The learned Vakil for the opposite party has argued that under Order 34, Rule 5, Sub-rule 2, of the Code of 1908, ah application for order absolute must be presented to the Court which made the decree nisi sought to be made absolute and that consequently if the preliminary decree has been made in modification of the order of the Court of first instance by a Court of Appeal, the application for an order absolute must be presented to the Court of Appeal by which the decree was made. The learned Vakil has, however, conceded that his contention is opposed to the uniform practice of this Court ever since 1882, when the “Transfer of Property Act” was passed. He has not also disputed tnat his contention is opposed to the cases of Sheo Narain v. Ghuni Lal 23 A. 88, Ram Dhani v.’Lalit Singh 31 A. 328 : 6 A.L.J. 25 : 2 Ind. Cas. 220) and Venkata Krishna Ayyar v. Thiagaraya Chetti 23 M. 521. Bat he has suggested that these decisions are based on the view that an application for an order absolute is in the nature of an application for execution of a decree [Oudh Behari v. Nageshar Lal 13 A. 278, and Mallikarjunadu Seth v. Lingamurti Pantulu 25 M. 244 at p. 278], a view which has never been adopted in this Court. [Akikunnissa v. Roop Lal Das 25 C. 133, Charu Chandra Mitter v. Bhagirath Pershad 12 C.W.N. 1028, and Bechoo Singh v. Bicharam Sahu 10 C.L.J. 91 : 7 Ind. Cas. 677.] We are unable to hold, however, that the conclusion of the Allahabad and Madras High Courts, namely, that an application for order absolute must be presented to the Court of first instance, although the preliminary decree was made by the appellate Court, in reversal, modification or affirmation of the order of the original Court-, is necessarily dependent upon the view that an application for order absolute is in the nature of an application for execution of a decree. That the view may be supported upon weighty reasons independent of any such consideration, is shown by the judgment of Mr. Justice Subramania Ayar in Venkata Krishna Ayyar v. Thiagarya Chetti 23 M. 521, where that learned Judge pointed out that the decree of the appellate Court must be taken to be the decree which the Court of first instance should have passed, if it had decided the case correctly. If the correct decree had been duly passed by the Court of first instance, an appeal would have been needless and the application for an order absolute would have been made to that Court. We agree with the conclusion of the learned Judge that it would be unreasonable to hold that the suit remained pending in the appellate Court, until the order absolute was passed; and that it would be more rational and convenient to hold that the proceedings of the appellate Court terminate with its decree, and that any further order, which the parties, require in order to give effect to their rights as settled by the decree, should be obtained from the Court of first instance, on which would have devolved the duty of making such order, if a correct decree had been passed in the first instance. From this point of view, the class of cases, in which it has been ruled that an application for amendment of a decree of a Court of first instanee, even when such decree has been merely affirmed by a Court of Appeal, should be made to the appellate and not the original Court, is easily distinguishable. [Rameswar v. Bhaba Sundari 11 C.L.J. 81 : 5 Ind. Cas. 304 and Aghore Kumar v. Mahamed Musa 11 C.L.J. 155 : 2 Ind. Cas. 662]. It may be conceded that so far as question of the determination of the rights of the parties is concerned, the decree of the appellate Court supersedes that of the Court of first instance which may in one sense be treated as merged in it. But there is no real inconsistency between the two positions, that in so far as any alteration of the decree by way of amendment is concerned, so as to affect the rights of the parties, the alteration ought to be made by the Court of Appeal itself, while in so far as an application for order absolute is concerned, which merely gives finality to the decree, the appropriate Court to entertain it is the original Court. If the contrary view were maintained, considerable difficulties might easily result. To take one illustration, if upon an application for order absolute, the judgment-debtor pleaded that the decretal amount had been paid, and the judgment-debt satisfied, the Court of Appeal, if it entertained the application, would not have at its disposal the machinery for investigation. Moreover, if the enquiry was made and final orders passed by the Court of Appeal itself, would such an order be treated as an original order and if so what would be the forum of appeal, if one was sought to be preferred against such decision? We are of opinion, therefore, that the interpretation, which has hitherto been accepted, is convenient and is based upon a reasonable construction of the provisions of the law, and is also in accordance with the policy on which the rules in Sections 15 and 583 of the “Civil Procedure Code,” of 1882, proceeded. We may further observe that the decision in Babu Prasad v. Khiali Ram A.W.N. (1906) 203 : 3 A.L.J. 828, the only case, which lends any support to the contention of the learned Vakil for the petitioner, does not deny the jurisdiction of the original Court to entertain an application for order absolute, but merely affirms the doctrine that the Court of appeal also has co-ordinate jurisdiction–a view which has been dissented from in Ram Dhani v. Lalit Singh 31 A. 328 : 6 A.L.J. 25 : 2 Ind. Cas. 220. We must, therefore, overrule the second contention of the learned Vakil for the opposite party.

4. We now proceed to consider the substantial question in controversy between the parties, namely, whether an order absolute ought to be made in favour of the mortgagee decree-holder till his accounts as receiver have been taken. The learned Vakil for the petitioner has relied on the terms of the decree nisi as made by this Court, in which no reference is made to the appointment of the plaintiff mortgagee as receiver of the mortgaged properties and it is directed that if the defendant fail to pay the sum mentioned, on or before the 7th February 1909, the plaintiff will be entitled to sell the property hypothecated to him in the usual way. No doubt the decree ought to have been drawn up in the form explained in the case of Simmons v. Blandy (1897) 1 Ch. 19 : 66 L.J. Ch. 83 : 75 L.T. 646 : 45 W.R. 296. It was pointed out in this case that in a mortgage suit in which a receiver of rents and profits has been appointed, the judgment ought to direct that in taking the account, the plaintiff should be charged with the amount (if anything) paid into Court by the receiver, and with such a sum as should be in the receiver’s hands, at the date of the certificate, and with such a sum (if any) as the plaintiff should submit to be charged with in respect of rents and profits to come into the receiver’s hands prior to the order } absolute. (See also Seton on Judgments, 5th Edition, Volume 3, page 2142). But although the decree in the present case has not been drawn up in this form, we are of opinion that this does not make any substantial difference in the positions of the parties. The mortgagee as receiver has been in possession, and has received the profits of the property; without any stretch of language, he may be taken to have been paid that profit, in part satisfaction of the judgment-debt. The question, therefore, arises, what is the precise position of a mortgagee who consents to act as receiver of the mortgaged properties in his suit to enforce the security? It may be pointed out that the receiver should ordinarily be an indifferent person between the parties to the suit, one who has no pecuniary . interest of his own, which might conflict with the duties of his office [Tripp v. The Chord Ry. Co. (1853) 11 Hare 241 : 68 Eng. Rep. 1264]. The propriety of appointing the mortgagee himself is extremely doubtful and in the present case, the plaintiff mortgagee who is a solicitor of this Court, would have acted prudently, if he had not yielded to the suggestion of the Subordinate Judge, and accepted the office of receiver, [Davis v. Barrett 13 L.J. Ch. 304]. But as he has accepted the office, he is liable to account, and the sums, if any received by him, must be applied towards the discharge of the judgment-debt before he can obtain an order absolute for sale. If the receiver was a stranger, according to the authorities in England, there would have been no embarassment to the mortgagee, because it has been held that inasmuch as the rerceiver appointed by the Court, is appointed on behalf, and for the benefit, of all persons interested as parties to the action, if a loss arises from the default of a receiver so appointed, the estate must bear it as between the parties to the action, [Hutchinson v. Massareene 2 Ball & Beatty 55; “Daniell on Chancery Practice” 7th Ed. Vol. 2, p. 1436]. But even this view has been controverted, and it has been maintained that where a mortgagee got his own solicitor appointed as receiver, the mortgagee must bear any loss caused by the defalcation of the receiver so appointed and the insufficiency of the securities. [Jones on Mortgages. Vol. 2, Section 1537A, Sarchan v. Mayo (1892) 50 N.J. Eq. 288 : 23 Atlantic 479 and Merchant Bank v. Kent (1880) 5 N.W. 627], It is not necessary for us, however, to consider the liability of a mortgagee for the default of a receiver appointed at his instance and upon his nomination. .But so far as the mortgagee himself is concerned, if he accepts the appointment of receiver, there can, in our opinion, be no reasonable doubt that he is bound to account for the profits actually received or which might with due diligence have been received by him. In fact, it has even been ruled [Land v. May (1904) 84 S.W. 489] that a mortgagee who sues for sale or foreclosure and subsequently obtains the appointment of a receiver pending litigation, is chargeable as mortgagee in possession from the date of the possession of the receiver, and is liable to account accordingly, though the contrary view was taken in Central Trust Company v. Worcester (1898) 90 Fed. 584. But whatever the position may be if the receiver is a stranger, it is but just that if the mortgagee is himself the receiver, the sums realized or realizable with ordinary diligence by him, should be set-off against the judgment-debt. In our opinion, upon no conceivable principle can we justify tire accumulation of interest upon the judgment-debt, while the mortgagee takes possession of the mortgaged properties, and realizes its profits. The powers and duties of mortgagee, who has been appointed receiver of the mortgaged property, were thus lucidly set forth in the case of Bolles v. Duff 54 Barb. 315: His relations, claims and interest as to the property might have been and probably -were urged against the fitness of his appointment as receiver, but having been appointed and having accepted such relations, claims and interest must not be permitted to interfere with his duties as receiver, or with the purpose or interest for which he was appointed. His duty as receiver clearly was to increase the surplus beyond what should be found due to him as mortgagee by getting as large a rental as he could for the trust property, and on his application to the Court, as receiver, for authority to lease, it was his duty to lay before the Court all the information he had or could with reasonable diligence have acquired as to the situation and value of the trust property” [Alderson on Receivers Section 436], We must consequently at firm the order of the Court below in so far as it directs an examination of the accounts of the receiver. It has been represented to us, however, that the plaintiff might be needlessly harassed by a protracted examination of the accounts which, though regularly submitted to the Court, have never been challenged. The Court below will take this fact into consideration when the accounts are examined. No doubt, the plaintiff might have protected himself if he had taken care to have the accounts passed from time to time. On the other hand if it is true that the accounts, though duly filed and notified to the judgment-debtors, have never been seriously challenged, a presumption may very well arise in favour of their accuracy. We further direct that the examination of the accounts be expedited so that the final orders upon the application for order absolute may be speedily passed. With these observations, we discharge the Rule with costs two gold mohurs.

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