{"id":186876,"date":"2004-10-29T00:00:00","date_gmt":"2004-10-28T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/u-p-state-sugar-corporation-and-vs-ms-mahalchand-m-kothari-and-on-29-october-2004"},"modified":"2016-04-15T06:16:51","modified_gmt":"2016-04-15T00:46:51","slug":"u-p-state-sugar-corporation-and-vs-ms-mahalchand-m-kothari-and-on-29-october-2004","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/u-p-state-sugar-corporation-and-vs-ms-mahalchand-m-kothari-and-on-29-october-2004","title":{"rendered":"U.P. State Sugar Corporation And &#8230; vs M\/S Mahalchand M. Kothari And &#8230; on 29 October, 2004"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">U.P. State Sugar Corporation And &#8230; vs M\/S Mahalchand M. Kothari And &#8230; on 29 October, 2004<\/div>\n<div class=\"doc_author\">Author: Dharmadhikari<\/div>\n<div class=\"doc_bench\">Bench: M. Dharmadhikari, P. P. Naolekar<\/div>\n<pre>           CASE NO.:\nAppeal (civil)  357-358 of 1999\n\nPETITIONER:\nU.P. State Sugar Corporation and another\n\nRESPONDENT:\nM\/s Mahalchand M. Kothari and others\n\nDATE OF JUDGMENT: 29\/10\/2004\n\nBENCH:\nM. Dharmadhikari &amp; P. P. Naolekar\n\nJUDGMENT:\n<\/pre>\n<p>J U D G M E N T<\/p>\n<p>Dharmadhikari J.\n<\/p>\n<p>\tBy Uttar Pradesh Sugar Undertakings (Acquisition) Ordinance,<br \/>\n1971 which later became an Act No. 23 of the same name [hereinafter<br \/>\nreferred to shortly as the &#8216;Ordinance\/Act&#8217;], M\/s Maheshwari Khetan<br \/>\nSugar Mill Pvt. Ltd., [Respondent No. 2 herein] at Ramkola, District<br \/>\nDeoria in the State of Uttar Pradesh, was acquired by the appellant<br \/>\nU.P. State Sugar Corporation [shortly referred to as &#8216;the Corporation&#8217;].\n<\/p>\n<p>\tOn the date of coming into force of the Ordinance,  the Sugar<br \/>\nMill was under management of Receiver appointed on 04.3.1970 by<br \/>\nthe Collector for recovery of dues of cane-growers as arrears of land<br \/>\nrevenue in accordance with section 279(1)(g) read with Section 286A<br \/>\nof the U.P. Zamindari Abolition and Land Reforms Act, 1950 [shortly<br \/>\nreferred to as &#8216;the Act of 1950&#8217;].\n<\/p>\n<p>M\/s Mahalchand M. Kothari which is a partnership firm carrying<br \/>\non trade in Guwahati in the State of Assam filed two suits in the Court<br \/>\nof Assistatnt District Judge, Guwahati for recovery of damages caused<br \/>\nto it as a result of non-supply of sugar under the contract entered into<br \/>\nby the plaintiff firm with the Receiver who was managing the Sugar<br \/>\nMill.  The orders were placed by the plaintiff for supply of different<br \/>\nquantities of sugar in the year 1979 and advance money was paid to<br \/>\nthe Receiver for timely supply.   The prices of sugar having gone up in<br \/>\nthe period of supply under the contract, the Receiver neither sent the<br \/>\nquantity of sugar nor returned the advance price paid by the plaintiff.<br \/>\nBoth the suits Nos. 11 &amp; 27 were filed in the year 1982.  The erstwhile<br \/>\nMill owner and the appellant Corporation were made defendants to the<br \/>\nsuits because by that time, Sugar Mill already stood transferred to,<br \/>\nvested in and been in actual possession of the Corporation in<br \/>\naccordance with section 3 of the Act.\n<\/p>\n<p>\tThe Corporation repudiated the claims made in the two suits<br \/>\npleading inter alia  that there was no privity of contract between the<br \/>\nplaintiff and the Corporation; the Receiver was managing the Sugar<br \/>\nMill on the date of alleged non-supply of quantity of sugar; the<br \/>\nerstwhile owner of the Sugar Mill had filed writ petition in the High<br \/>\nCourt of  Allahabad challenging the constitutional validity of the Uttar<br \/>\nPradesh Sugar Undertakings (Acquisition) Ordinance, 1971 in which<br \/>\noperation of the Ordinance was stayed and the possession of the<br \/>\nSugar Mill was restored to the erstwhile owner on specified terms and<br \/>\nconditions of the order of stay.\n<\/p>\n<p>\tThe Assistant District Judge, Guwahati by two separate<br \/>\njudgements, decreed both the suits holding  inter alia that the<br \/>\nCorporation cannot avoid its liability towards the claims of the plaintiff<br \/>\nas the Sugar Mill stood transferred to and vested in it from the<br \/>\n&#8216;appointed day&#8217;  i.e. 3.7.1971 under Section 3 of the Act.\n<\/p>\n<p>The Corporation had preferred two appeals to the High Court of<br \/>\nGuwahati which were allowed on 26.6.1996 solely on the ground that<br \/>\nthe suits were not maintainable as the plaintiff was not a registered<br \/>\npartnership firm and was, therefore, incompetent to sue as a firm. The<br \/>\nplaintiff then had approached this Court by Civil Appeal Nos. 3057 and<br \/>\n3058 of 1997 which were allowed on 25.7.1997 as it was pointed out<br \/>\nthat original certificate showing registration of the firm had been<br \/>\nproduced before the trial court. This Court, therefore, remitted the<br \/>\nappeals to the High Court for their decision on merits.\n<\/p>\n<p>\tThe Division Bench of the High Court by the impugned judgment<br \/>\ndated 16.7.1998 dismissed both the appeals of the Corporation and<br \/>\nconfirmed the decrees granted by the trial court in the two suits in<br \/>\nfavour of the respondent\/plaintiff.\n<\/p>\n<p>\tThe Corporation, therefore, after seeking leave is before this<br \/>\nCourt in these two appeals.\n<\/p>\n<p>\tLearned counsel appearing for the Corporation has taken us<br \/>\nthrough the relevant dates and proceedings of the Allahabad High<br \/>\nCourt in the writ petition which was filed challenging the<br \/>\nOrdinance\/Act. It is strenuously urged that there was no privity of<br \/>\ncontract between plaintiff and the Corporation.  The Corporation,<br \/>\ntherefore, could not be held liable towards the losses and damages<br \/>\ncaused to the plaintiff by alleged breach of contract committed by the<br \/>\nReceiver in not supplying the sugar for which orders had been placed<br \/>\nby the plaintiff.  It is submitted that for transferring and vesting of<br \/>\nSugar Mill in the Corporation,  the &#8216;appointed day&#8217; fixed under Section<br \/>\n3 of the Ordinance\/Act was 3.7.1971 but the erstwhile owner of the<br \/>\nSugar Mill challenged the validity of the Ordinance in the Allahabad<br \/>\nHigh Court and obtained a stay order on 09.7.1971 whereunder the<br \/>\nReceiver, who was already managing the Sugar Mill as a nominee of<br \/>\nthe Collector under section 279(1)(g) read with Section 286A of the<br \/>\nAct of 1950, continued in the management of the Sugar Mill for and on<br \/>\nbehalf of the erstwhile owner. It is contended by the counsel on behalf<br \/>\nof the Corporation that when two orders for supply of sugar were<br \/>\nalleged to have been placed on 02.2.1979 and 09.2.1979 by the<br \/>\nplaintiff, the Receiver was in possession and management of the sugar<br \/>\nmill.  He was acting not for the Corporation but for and on behalf of<br \/>\nthe erstwhile owner of the mill who was in de jure possession of the<br \/>\nmill as an effect of the order of stay dated 09.7.1971 obtained in Writ<br \/>\nPetition No. 4193 of 1971 filed in the Allahabad High Court challenging<br \/>\nthe constitutional validity of the Ordinance.  Under the terms of the<br \/>\norder of stay, operation of the Ordinance was stayed and possession of<br \/>\nthe mill was restored to the erstwhile owner.\n<\/p>\n<p>\tLearned counsel appearing for the respondent plaintiff heavily<br \/>\nrelied on the photocopies of the order-sheets of the writ petition No.<br \/>\n4193 of 1971 filed in the Allahabad High Court.  An attempt has been<br \/>\nmade to show that the order obtained by the erstwhile owner of the<br \/>\nSugar Mill on 09.7.1971 staying operation of the Ordinance had been<br \/>\nvacated by the High Court on 29.7.1974 on the application of the<br \/>\nReceiver who was experiencing various difficulties in managing and<br \/>\nrunning the Sugar Mill. The learned counsel for the respondent plaintiff<br \/>\ncontended that as the stay against Ordinance\/Act passed on 09.7.1971<br \/>\nstood vacated on 29.7.1974, the Sugar Mill would be deemed to have<br \/>\nstood transferred to and vested in the Corporation on the &#8216;appointed<br \/>\nday&#8217; 03.7.1971. The orders for supply of sugar were placed on<br \/>\n02.2.1979 and 09.2.1979 by the plaintiff after the stay against<br \/>\nOrdinance had been vacated by the High Court on 29.7.1974. On<br \/>\nbehalf of the respondent plaintiff, it is,  therefore, submitted that for<br \/>\nthe acts and omissions of the Receiver the Corporation, in whom the<br \/>\nSugar Mill stood vested, could not have been allowed to repudiate its<br \/>\nliability towards the breach of contract committed by the Receiver.\n<\/p>\n<p>\tAt the outset, it is necessary to put straight the factual position<br \/>\nwhich is discernible on a careful perusal of the proceedings of the writ<br \/>\npetition in the High Court in which the constitutional  validity of the<br \/>\nAct\/Ordinance was challenged.\n<\/p>\n<p>\tOn behalf of the respondent plaintiff, an attempt was made to<br \/>\nproject that the order dated 09.7.1971 granting stay against the<br \/>\nOrdinance\/Act, stood vacated on 27.9.1974 on the application of the<br \/>\nReceiver who prayed for unfettered right to manage the Sugar Mill.  In<br \/>\nthe additional documents filed by the parties before us, a copy of the<br \/>\napplication filed by the receiver seeking vacation of stay and<br \/>\nphotocopies of the order-sheets of the High Court in the writ petition<br \/>\nhave been produced.  The Receiver had filed an affidavit on 16.5.1974<br \/>\nin the High Court of Allahabad in which prayer was made to vacate the<br \/>\ninterim order of stay.\n<\/p>\n<p> On behalf of respondent plaintiff, reliance is placed on the<br \/>\norder-sheet recorded in the writ petition on 29.7.1974.  It reads thus:-\n<\/p>\n<p>&#8216;Hon. Gulati J.\n<\/p>\n<p>29.7.1974.\t\t &#8216;Application dated 17.3.1974 allowed.<br \/>\nList the writ for hearing on 16.9.1974.&#8217; <\/p>\n<p>Learned counsel for the respondent submitted that in the above<br \/>\nquoted order, the date of the application mentioned as 17.3.1974<br \/>\nshould be correctly read as 17.5.1974 as according to him the hand-<br \/>\nwritten figure 3 showing the month should be read as 5. We find that<br \/>\nnothing turns on the fact whether the application which was allowed on<br \/>\n29.7.1974 was of date 17.3.1974 or 17.5.1974.  After 29.7.1974, the<br \/>\nwrit petition stood adjourned to several dates for hearing. The order-<br \/>\nsheet of 22.5.1976 reads thus :-\n<\/p>\n<p>&#8216;Hon. Sapru J.,<\/p>\n<p>22.5.1976 &#8216;An application to vacate the stay order has been<br \/>\nfiled on 10.5.1976. A counter affidavit has been filed<br \/>\nwithin three weeks. The rejoinder affidavit may be filed<br \/>\nby 07th of July, 1976. List it for orders on 08.7.1976.&#8217; <\/p>\n<p>Office Report dated 07.07.1976 reads thus :-\n<\/p>\n<p>Misc. 5657\/76 dated 10.5.76 (to vacate stay)<\/p>\n<p>In compliance of court&#8217;s order dated 20.5.1976, neither counter nor<br \/>\nrejoinder affidavit has been filed. Put up for further orders.\n<\/p>\n<p>On 08.7.1976, as directed earlier, the case was listed before<br \/>\nthe Division Bench which recorded the following order :-<br \/>\n&#8216;Hon. Yashoda Nandan J.,<br \/>\nHon. H. N. Seth J., <\/p>\n<p>8.7.1976 &#8216;We are informed that the application for vacating the stay<br \/>\norder is part-heard before a Bench consisting of Hon. C.P.S. Singh and<br \/>\nHon. Mahrotra JJ. List this application before the bench concerned at<br \/>\nan early date.&#8217;<\/p>\n<p>\tFrom the above quoted subsequent orders, it appears that the<br \/>\nparties were repeatedly taking time to file additional pleadings and<br \/>\ncounters but no orders on application for vacating stay was passed.<br \/>\nThe writ petition was placed before various benches between July,<br \/>\n1997 to April, 1979. The writ petition challenging the validity of the<br \/>\nOrdinance\/Act was dismissed on 3.5.1979 which can be said to be the<br \/>\nevent whereupon the interim order of stay of the Ordinance\/Act<br \/>\npassed on 09.7.1971 stood automatically vacated.\n<\/p>\n<p>From the resume of the above facts gathered out from the<br \/>\nphotocopies of the proceedings of the writ petition, the fact which<br \/>\nconclusively emerges is that the conditional interim stay granted on<br \/>\n9.7.1971 in the writ petition challenging constitutional validity of the<br \/>\nOrdinance\/Act stood vacated only on the final dismissal of the writ<br \/>\npetition on 03.5.1979. As is sought to be projected on behalf of the<br \/>\nrespondent, the stay was not vacated on 29.7.1974. On that date,<br \/>\nsome other application dated 17.3.1974 (details of which are not clear<br \/>\nfrom the proceedings of the writ petition) happened to be allowed. The<br \/>\nfurther proceedings in the writ petition clearly go to show that the<br \/>\napplication for vacating stay remained pending on 22.5.1976 and<br \/>\n08.7.1976.  It was never decided during pendency of the writ petition.<br \/>\nThe stay order stood vacated only when judgment was delivered on<br \/>\n03.5.1979 and the writ petition questioning the validity of the<br \/>\nOrdinance\/Act was dismissed.\n<\/p>\n<p>\tOn these facts culled out from the proceedings of the writ<br \/>\npetition, it is clear that Receiver entered into alleged contract for<br \/>\nSupply of agreed quantities of sugar to the plaintiff respondent on<br \/>\n2.2.1979 and 9.2.1979 when stay order dated 9-7-1971 passed in the<br \/>\nwrit petition was in operation.\n<\/p>\n<p>\tNext, we have to consider what is the legal effect of the order of<br \/>\nstay passed by the High Court in the writ petition on 09.7.1971. To<br \/>\nascertain the legal effect of the stay order passed in writ petition, it is<br \/>\nnecessary to reproduce its contents and examine it critically.\n<\/p>\n<p>O R D E R<\/p>\n<p>Issue notice.\n<\/p>\n<p>Till further orders of this Court, the operation of U.P.<br \/>\nOrdinance No. 13 of  1971 shall remain stayed so far as the<br \/>\nReceiver is concerned. The status quo, as on July 2, 1971, shall<br \/>\nbe restored and the petitioner company which admittedly, was<br \/>\nrunning the mills on that date, will be put back in possession.<br \/>\nThis order will, however, not affect any other proceedings pending<br \/>\nand any other orders that may be passed by any competent<br \/>\ncourt or authority hereafter. This order will be further subject to<br \/>\nthe following condition:-\n<\/p>\n<p>1.\tThe Receiver shall made arrangements for the off season<br \/>\nrepairs of the machinery etc. and if he takes advances from<br \/>\nBank for this purpose, final orders regarding repayment of the<br \/>\nsame would be passed at the time of the final disposal of the<br \/>\nwrit petition.\n<\/p>\n<p>2.\tThe amount of money to be spent on the repairs shall not<br \/>\nexceed the average amount spent in the last three years.\n<\/p>\n<p>3.\tThe Receiver  is restrained from removing or disposing of any<br \/>\nproperty of the undertaking other than sugar, molasses<br \/>\nand waste products.\n<\/p>\n<p>4.\tThe  Receiver shall maintain the plant and machinery in good<br \/>\nrepairs to ensure the satisfactory running of the factory in the<br \/>\ncoming crushing season. The Collector, Deoria, shall, however,<br \/>\nhave free access to the factory and will  be consulted by the<br \/>\nreceiver in matters of management. It will be open to the<br \/>\nCollector to prepare such inventory as he desires. If an<br \/>\ninventory is prepared, the Collector shall supply a copy thereof<br \/>\nto the Receiver.\n<\/p>\n<p>5.\tThe Receiver shall not create any long term or unduly heavy<br \/>\nliabilities on the property including the mortgage of fixed<br \/>\nassets; any loans that he may raise shall be only for the<br \/>\npurpose of capital investment or working capital of the<br \/>\nundertaking concerned.\n<\/p>\n<p>6.\tThe Receiver shall make no changes in the terms and<br \/>\nconditions of any employee, except with the previous<br \/>\npermission of this Court.\n<\/p>\n<p>\tCopies of this order may be supplied to the counsel for the<br \/>\nparties on payment of usual charges.\n<\/p>\n<p>\t\t\t\t\t\t\t    [Emphasis supplied]<\/p>\n<p>\tFrom the terms and conditions of the above quoted order of stay<br \/>\npassed on 9-7-1971, what seems to us is that the operation of the<br \/>\nimpugned Ordinance\/Act was partially stayed on specified conditions to<br \/>\nregulate the power of the Receiver which was already managing the<br \/>\nSugar Mill under section 279(1)(g) read with section 286A of the Act of<br \/>\n1950. The legal effect of the order of stay (quoted above) was that the<br \/>\nReceiver which was appointed under the Act of 1950, was to continue<br \/>\nin management of the Mill on the conditions imposed by the High<br \/>\nCourt.  From term no. 3 in the stay order, it is clear that the  Receiver<br \/>\nhad only power to carry on day-to-day business of the Sugar Mill  and<br \/>\nfor that purpose, to sell sugar, molasses and waste products.  The<br \/>\nReceiver, when  entered into the alleged contract in February, 1979 to<br \/>\nsupply sugar to the plaintiff respondent was acting as a statutory<br \/>\nReceiver  who was allowed with added conditions to continue in<br \/>\nmanagement of the Sugar Mill by the High Court in accordance with<br \/>\nsection 279(1)(g) and Section 286-A of the Act of 1950.  Under the<br \/>\nterms of the stay order, the status-quo as existing on 2.7.1971 i.e. a<br \/>\nday before the &#8216;appointed day&#8217; was restored and the erstwhile owner<br \/>\nwas directed to be put back in possession of the Sugar Mill. The de<br \/>\njure possession of the Sugar Mill was thus restored to the erstwhile<br \/>\nowner but de facto possession on terms and conditions contained in<br \/>\nthe order of stay was allowed to be retained by the  Receiver with right<br \/>\nto  manage the Sugar Mill.\n<\/p>\n<p>\tThe next legal question that arises is:  what is the legal effect of<br \/>\nvacation of the order of stay on ultimate dismissal of the writ petition<br \/>\non 3.5.1979?\n<\/p>\n<p>\tThe other related question is : what was the position of the<br \/>\nReceiver who was managing the Sugar Mill? Whether he was<br \/>\nrepresenting the erstwhile owner or the Corporation or he was<br \/>\nrepresenting none of them but was representing the Collector who had<br \/>\nappointed him under the Act of 1950? For the aforesaid questions, a<br \/>\nbrief survey of the provisions of the Ordinance\/Act and the Act of 1950<br \/>\nwould be necessary.\n<\/p>\n<p>\tThe Act of 1950 prescribes appointment of Receiver on the<br \/>\nproperty of the defaulter as one of the modes of recovery of dues as<br \/>\narrears of land revenue.  Section 279 (1)(g) reads as under :-<br \/>\n&#8220;Section 279.  Procedure for recovery of an arrear of land revenue.-<br \/>\n(1) An arrear of land revenue may be recovered by any one or more of<br \/>\nthe following processes :\n<\/p>\n<p>&#8230;&#8230;&#8230;&#8230;..\n<\/p>\n<p>&#8230;&#8230;&#8230;&#8230;..\n<\/p>\n<p>(g) by appointing a receiver of any property, moveable or immovable<br \/>\nof the defaulter.\n<\/p>\n<p>\tSection 286A of the Act of 1950 is the other relevant Section<br \/>\nwhich empowers the Collector to appoint a Receiver for recovery of<br \/>\ndues as arrears of land. It reads as under :-\n<\/p>\n<p>&#8220;Section 286-A. Appointment of Receiver.-(1) Notwithstanding<br \/>\nanything in this Act when [an arrears of revenue or any other sum<br \/>\nrecoverable as an arrear of revenue] is due, the Collector, may in<br \/>\naddition to or instead of any of the processes hereinbefore specified,<br \/>\nby order  <\/p>\n<p>a)\tappoint, for such period as he may deem fit, a receiver  of any<br \/>\nmoveable or immovable property of the defaulter;\n<\/p>\n<p>b)\tremove any person from the possession or custody of the<br \/>\nproperty;\n<\/p>\n<p>c)\tcommit the same to the possession, custody of management of<br \/>\nthe receiver ;\n<\/p>\n<p>d)\tconfer upon the receiver  all such powers, as to bringing and<br \/>\ndefending suits and for the realization, management,<br \/>\nprotection, preservation and improvement of the property, the<br \/>\ncollection of the rents and profits thereof, the application and<br \/>\ndisposal of such rents and profits, and the execution of<br \/>\ndocuments, as the defaulter himself has or such of those<br \/>\npowers as the Collector thinks fit.&#8221;\n<\/p>\n<p>As the Statement of Objects and Reasons of the<br \/>\nOrdinance\/Act indicates that the legislation is brought into force by the<br \/>\nState to acquire such Sugar Mills where because of the<br \/>\nmismanagement of the Mills, serious problems are faced by the cane-<br \/>\ngrowers and the labour with consequential adverse impact on the<br \/>\ngeneral economy of the area where the mills are situated. Under the<br \/>\nAct, the scheduled Sugar Mills or undertakings are acquired by the<br \/>\nState which stand transferred to and vested in the Corporation from<br \/>\nthe &#8216;appointed day&#8217;.   Section 2(a) &amp; (c) of the Act define &#8216;appointed<br \/>\nday&#8217; and &#8216;Corporation&#8217; respectively.  Section 2(a) &amp; (c) and section 3 of<br \/>\nthe Act read as under:-\n<\/p>\n<p>Section 2. Definition.  In this Act, unless the context otherwise<br \/>\nrequires  <\/p>\n<p>(a)\t&#8216;appointed day&#8217; in relation to the undertakings specified in<br \/>\nSchedule I means July 3, 1971 and in relation to the<br \/>\nundertakings specified in Schedule II means October 28, 1984.\n<\/p>\n<p>(b)\t&#8230;&#8230;&#8230;&#8230;&#8230;..\n<\/p>\n<p>(c)\t&#8220;Corporation&#8221; means the Uttar Pradesh State Sugar Corporation<br \/>\nLimited, a Government Company within the meaning of section<br \/>\n617 of the Companies Act, 1956 (Act I of 1956).\n<\/p>\n<p>(d)\t&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\n<\/p>\n<p>Section 3. Vesting.  On the appointed day, every scheduled<br \/>\nundertaking shall, by virtue of this Act, stand and be deemed to have<br \/>\nstood transferred to and vest and be deemed to have vested in the<br \/>\nCorporation free from any debt, mortgage, charge or other<br \/>\nencumbrance or lien, trust or similar obligation (excepting any lien or<br \/>\nother obligation in respect of any advance on the security of any sugar<br \/>\nstock or other stock-in-trade) attaching to the undertaking :\n<\/p>\n<p>Provided that any such debt, mortgage charge or other encumbrance<br \/>\nor lien, trust or similar obligation shall attach to the compensation<br \/>\nreferred to in section 7, in accordance with the provisions of that<br \/>\nsection, in substitution  for the undertaking :\n<\/p>\n<p>Provided further that a debt, mortgage, charge or other encumbrance<br \/>\nor lien, trust or similar obligation created after the scheduled<br \/>\nundertaking or any property or asset comprised therein had been<br \/>\nattached, or a receiver appointed over it, in any proceedings for<br \/>\nrealization of any tax or cess or other dues recoverable as arrears of<br \/>\nrevenue shall be void as against all claims for dues recoverable as<br \/>\narrears of revenue.\n<\/p>\n<p>\tOne of the consequences of vesting of the sugar mill in the<br \/>\nCorporation under section 3 of the Act, as provided in section 4(a), is<br \/>\nthat any receiver appointed by the court on the scheduled<br \/>\nundertaking\/Sugar Mill shall cease to function from the appointed day.<br \/>\nSection 4(a) of the Act reads thus :-\n<\/p>\n<p>&#8220;Section 4. Certain consequences of vesting.  Notwithstanding<br \/>\nanything contained in any other law for the time being in force, and<br \/>\nsave as otherwise provided in this Act, on and from the appointed<br \/>\nday <\/p>\n<p>(a)\tevery appointment of  Receiver over any scheduled<br \/>\nundertaking by any court shall cease;\n<\/p>\n<p>(b)\t&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8211;&#8221;\n<\/p>\n<p>[Emphasis supplied]<\/p>\n<p>\tThe aforesaid provision refers to any  &#8216;Receiver appointed by any<br \/>\nthe court&#8217; and not a  Receiver appointed by the Collector under the<br \/>\nprovisions of the Act of 1950. The mode of delivery of possession of<br \/>\nthe acquired Sugar Mill is contained in section 5. It provides first<br \/>\ndelivery of possession of the Sugar Mill by the owner to the Collector<br \/>\nwho shall prepare inventory of property, assets, books of accounts,<br \/>\nregisters etc., and thereupon shall deliver the possession of the<br \/>\nundertaking\/Sugar Mill to the Corporation. Section 5 of the Act reads<br \/>\nthus :-\n<\/p>\n<p>&#8220;Section 5. Duty to deliver possession. (1) Where any scheduled<br \/>\nundertaking has vested in the Corporation under section 3, every<br \/>\nperson in whose possession or custody or under whose control any<br \/>\nproperty or asset, book of account, register or other document<br \/>\ncomprised in that undertaking may be, shall forthwith deliver the same<br \/>\nto the Collector.\n<\/p>\n<p>(2)\tThe Collector may take all necessary steps for securing<br \/>\npossession of any such property or asset, book of account, register or<br \/>\ndocument, and in particular, may use or cause to be used such force<br \/>\nas may be necessary.\n<\/p>\n<p>(3)\tThe Collector shall prepare an inventory of all properties,<br \/>\nassets, books of account, registers and documents taken possession of<br \/>\nunder this section, so far as practicable in the presence of the occupier<br \/>\nor his authorized representative.\n<\/p>\n<p>(4)\tDeliver of possession to the Collector under this section shall<br \/>\namount to delivery of possession to the Corporation.\n<\/p>\n<p>(5)\tWithout prejudice to the provisions of the foregoing sub-<br \/>\nsections, any person referred to in sub-section (1) shall be liable to<br \/>\naccount to the corporation for any such property or asset, book of<br \/>\naccount, register or document which he has failed to deliver to the<br \/>\nCollector.\n<\/p>\n<p>\tThe entry at Serial No. 4 in Column Nos. 2 &amp; 3 of  Schedule I<br \/>\nattached to the Act, shows the Sugar Mill named  Maheshwari Khetan<br \/>\nSugar Mills (Pvt.) Ltd., Ramkola, District Deoria stands acquired and<br \/>\nvested in the Corporation on the appointed day on payment of fixed<br \/>\ncompensation of Rs. 11,00,000\/-.\n<\/p>\n<p>\tFrom the aforesaid provisions of the Act of 1950 and the<br \/>\nOrdinance\/Act, it is clear that the Receiver who was in the<br \/>\nmanagement of the Sugar Mill on the &#8216;appointed day&#8217; was not a<br \/>\nReceiver appointed by any Court. He was a Receiver appointed by the<br \/>\nCollector under the Act of 1950 and on the vesting of the Sugar Mill on<br \/>\nthe appointed date 3.7.1971, was in possession and management of<br \/>\nthe Sugar Mill not as an agent either of the erstwhile Sugar Mill owner<br \/>\nor the corporation. He was a statutory Receiver appointed under<br \/>\nsection 279(1)(g) read with section 286-A of the Act of 1950 for the<br \/>\npurpose of recovery of dues of the cane-growers in the manner as<br \/>\narrears of land revenue.  He was allowed to continue in management<br \/>\nof the Sugar Mill by the High Court on the terms and conditions<br \/>\nimposed in the order of stay passed during pendency of the writ<br \/>\npetition.\n<\/p>\n<p>\tThe liabilities incurred by a statutory Receiver in the course of<br \/>\nmanagement of the Sugar Mill are liabilities attached to assets or<br \/>\nproperties of the Sugar Mill because neither the erstwhile owner nor<br \/>\nthe Corporation, which later acquired the Sugar Mill, was responsible<br \/>\nfor the alleged losses or damages caused to the plaintiff by the alleged<br \/>\nbreach of contract committed by the receiver in non-supply of the<br \/>\nquantity of sugar.\n<\/p>\n<p>The general rule is that a  receiver takes the rights, causes, and<br \/>\nremedies which were in the individual or estate whose  receiver he is,<br \/>\nor which were available to those whose interests he was appointed to<br \/>\nrepresent. Ordinarily none of the parties to the suit in which a<br \/>\nreceiver was appointed is personally responsible for losses and<br \/>\nliabilities incurred in the administration of the receivership, but, except<br \/>\nas the  receiver may be personally liable therefor, such losses and<br \/>\nliabilities fall on the estate. [See statement of law in Corpus Juris Secundum<br \/>\nVol.75 Articles 325 &amp; 187 at pages 833 and 1000, respectively]<\/p>\n<p>\tIn the present suit, the  Receiver has not been impleaded as a<br \/>\nparty-defendant and there is  no claim against him for any misconduct<br \/>\ncommitted by him in management of the Sugar Mill.  He is not alleged<br \/>\nto be personally liable for the alleged breach of contract.  The liability,<br \/>\ntherefore, towards the alleged loss or damage arising from  breach of<br \/>\ncontract attaches to the Sugar Mill and can be allowed to  be realized<br \/>\nfrom the person in whom the title of Sugar Mill stands vested.\n<\/p>\n<p>A  statutory Receiver is merely the legal representative of the<br \/>\nproperty placed in his hands as such.  In determining his liability the<br \/>\ncourt will only determine the liability of the property.  It is not material<br \/>\nwhether the liability existed before or has accrued since his<br \/>\nappointment.  A contractual liability arising against the receiver during<br \/>\nthe course of management of the property for acts or omissions<br \/>\ncommitted by him for the benefit of the property, is not merely<br \/>\nenforceable against the receiver but is a liability attached to the<br \/>\nproperty in his receivership, which can be recovered from the property<br \/>\nand through the person in whom the property vests. [See Statement of<br \/>\nlaw in Words and Phrases, Permanent Edition Vol.36 at page 742 from the Heading<br \/>\nRepresentative of property]<\/p>\n<p>\tAs is the admitted position, on the coming into force of the<br \/>\nOrdinance, the Sugar Mill stood transferred to and vested in the<br \/>\nCorporation on the appointed date 3.7.1971. On that date, the<br \/>\nReceiver appointed by the Collector under the provisions of 1950 Act<br \/>\nwas already holding custody of the Sugar Mill and was managing the<br \/>\nsame.   During course of the Writ Petition filed by the owner of the<br \/>\nSugar Mill in which the constitutional validity of the ordinance\/Act was<br \/>\nchallenged, a stay order, on the limited terms and conditions, was<br \/>\npassed on 9.7.1971.  The terms and conditions of the order<br \/>\nreproduced above, restored the de jure possession of the Sugar Mill to<br \/>\nthe erstwhile owner but de facto possession and management of the<br \/>\nSugar Mill was allowed to remain undisturbed with the receiver<br \/>\nalthough with limited powers to him. The Receiver was specifically<br \/>\nallowed in accordance with term No.3 of the stay order to sell sugar,<br \/>\nmolasses and other waste products.  By virtue of the order of stay<br \/>\npassed by the High Court, during pendency of the writ petition, the<br \/>\nReceiver appointed under the Act of 1950, continued to manage the<br \/>\nSugar Mill subject to the ultimate result of the writ petition.  The Writ<br \/>\nPetition ultimately came to be dismissed on 3.5.1979 and the stay<br \/>\norder containing the terms and conditions (quoted above) passed on<br \/>\n9.7.1971 stood automatically vacated. The natural consequence was<br \/>\nrestoration of full operation of the provisions of the ordinance\/Act as<br \/>\nwas originally passed. In accordance with Section 3 of the Act, the<br \/>\nSugar Mill stood transferred and vested in the Corporation from the<br \/>\nappointed date 3.7.1971.  On vacation of the stay order with effect<br \/>\nfrom the appointed day-3.7.1971, the operation of the Ordinance\/Act<br \/>\nwas revived.  The liability arising from breach of contract committed<br \/>\nby the Receiver was not of the Corporation. It was an obligation<br \/>\nattached to the property of the Sugar Mill which was under the<br \/>\nmanagement of the  Receiver, initially under  the 1950 Act and<br \/>\ncontinued under the order of stay passed by the High Court.  Since the<br \/>\nliability towards breach of contract was attached to the sugar mill<br \/>\nunder the management of the Receiver, the Corporation in whom title<br \/>\nof the sugar mill stands  vested  under  Section  3  of  the<br \/>\nAct cannot avoid the liability &#8211; it being a burden on the said property<br \/>\nand recoverable from it.\n<\/p>\n<p>\tIt is of no importance or consequence that actual or de facto<br \/>\npossession of the property was received by the Corporation under a<br \/>\nformal order of Collector, Deoria on 23.5.1979, only after dismissal of<br \/>\nthe Writ Petition on 3.5.1979 and consequent discharge of the<br \/>\nReceiver.\n<\/p>\n<p>\tThe Ordinance was stayed by the High Court to restore status<br \/>\nquo ante existing on 2.7.1971 that is a day prior to appointed date<br \/>\n3.7.1971. But on the dismissal of writ petition and automatic vacation<br \/>\nof the stay order of the High Court, the operation of the Ordinance\/Act<br \/>\nwith all legal consequences flowing from the said law stood restored<br \/>\nfrom the appointed date. The trial court and the High Court are<br \/>\nperfectly right in holding in their judgments that the order of stay<br \/>\npassed in writ petition could have no effect of postponing the<br \/>\n&#8216;appointed day; statutorily fixed under section 3 of the Ordinance\/Act.\n<\/p>\n<p>\tThe argument advanced on behalf of the corporation cannot be<br \/>\naccepted that the Sugar Mill came to be transferred to the Corporation<br \/>\nonly when its actual possession was formally obtained from the<br \/>\nCollector, Deoria on 23.5.1979 after dismissal of the writ petition.\n<\/p>\n<p>\tThe legal status and position of a receiver appointed by the<br \/>\nCourt and a Receiver appointed under in a Statute are different. In the<br \/>\ninstant case, the receiver appointed under the Act of 1950 and<br \/>\ncontinued by the High Court on terms and conditions contained in the<br \/>\nstay order during pendency of the writ petition, was a statutory<br \/>\nreceiver and his rights and liabilities were attached to the property for<br \/>\nthe management of which he was appointed. The receiver was not an<br \/>\nagent of either of the parties.  For his acts and omissions, a third party<br \/>\ncould raise a claim against the party in whom the property stood<br \/>\nvested and to which the liability was attached.\n<\/p>\n<p>The suits were filed by the plaintiff claiming losses and damages<br \/>\nfor breach of contract committed by the receiver within the prescribed<br \/>\nperiod of limitation. On the date of filing of the suits, the receiver was<br \/>\nnot in possession of the Sugar Mill as the actual possession of the<br \/>\nSugar Mill had been restored to the Corporation. It was, therefore, not<br \/>\nnecessary for the plaintiff to implead the receiver as a party to the<br \/>\nsuits. The Receiver could not be made personally liable for his acts and<br \/>\nomissions in the course of management of the Sugar Mill and which<br \/>\nare not alleged to be mala fide.\n<\/p>\n<p>\tOur conclusion, therefore, is that as none of the parties i.e. the<br \/>\nerstwhile owner or the Corporation is personally liable for the breach of<br \/>\ncontract committed by the receiver in the course of management of<br \/>\nthe Sugar Mill, the contractual liability of the receiver towards the<br \/>\nplaintiff is recoverable from the property of the Sugar Mill, and<br \/>\ntherefore, through the Corporation in whom the property stands<br \/>\nvested under the Act.\n<\/p>\n<p>\tAs a result of the detailed discussion of facts and law as above,<br \/>\nboth the appeals stand dismissed with costs and the decrees granted<br \/>\nby the trial court are hereby confirmed.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India U.P. State Sugar Corporation And &#8230; vs M\/S Mahalchand M. Kothari And &#8230; on 29 October, 2004 Author: Dharmadhikari Bench: M. Dharmadhikari, P. P. Naolekar CASE NO.: Appeal (civil) 357-358 of 1999 PETITIONER: U.P. State Sugar Corporation and another RESPONDENT: M\/s Mahalchand M. Kothari and others DATE OF JUDGMENT: 29\/10\/2004 BENCH: [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-186876","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>U.P. State Sugar Corporation And ... vs M\/S Mahalchand M. 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