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Mrs. K.P.M. Saheed and ors. Vs. the Aluminium Fabricating Company and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtKerala High Court
Decided On
Case NumberC.M.A. No. 30 of 1979 and C.R.P. No. 3003 of 1980
Judge
Reported inAIR1986Ker209
ActsCode of Civil Procedure (CPC) , 1908 - Sections 47 - Order 21, Rules 66 and 90 - Order 40, Rule 1
AppellantMrs. K.P.M. Saheed and ors.
RespondentThe Aluminium Fabricating Company and ors.
Appellant Advocate V.P. Mohankumar,; K. Ramakumar,; C.M. James Chacko,;
Respondent Advocate K.C. John,; George Varghese,; Philip Antony Chacko,;
Cases ReferredVenkata Mallayya v. T. Ramaswami
Excerpt:
.....set aside. (ii) appeal - section 47 of code of civil procedure, 1908 - when property in hands of receiver appointed by court sold in court auction - receiver is 'representative' entitled to maintain appeal under section 47 - validity of sale can be decided at instance of receiver. - - but as the scope of the receiver order is itself in dispute, it is better to extract the relevant passages from that order. that custody cannot be defeated; -the general rule is well settled that property in the hands of the receiver is exempt fromjudicial process, except of course permitted by the appointing court. and the wages of contempt of court in this jurisdiction may well be voidability of the whole proceeding. ..of course, failure to secure such leave till the end of the lis may prove fatal...........in these two connected matters are : -- (1) when a property in 'custodia legis', in the hands of a receiver appointed by a court is sold in court auction, without obtaining leave of court, is that sale valid; if not, can that sale be set aside under section 47 c.p.c. or only under order xxi rule 90 c.p.c.? (2) can a receiver maintain an 'application to set aside a sale under section 47 of thec.p.c.? (3) is an attachment effected in violation of order xxi rule 54(2) of the c.p.c. valid? 2. the brief facts are these :-- 'sangham', an airconditioned cinema theatre situated in about 75 cents of land in the heart of the calicut corporation, with all fittings and fixtures, was sold in court auction on 17-7-1978 for rupees twenty thousand and ten subject to certain public and other charges......
Judgment:

Bhaskaran Nambiar, J.

1. Themain questions that arise for determination in these two connected matters are : --

(1) When a property in 'custodia legis', in the hands of a receiver appointed by a Court is sold in Court auction, without obtaining leave of Court, is that sale valid; if not, can that sale be set aside under Section 47 C.P.C. or only under Order XXI Rule 90 C.P.C.?

(2) Can a receiver maintain an 'application to set aside a sale under Section 47 of theC.P.C.?

(3) Is an attachment effected in violation of Order XXI Rule 54(2) of the C.P.C. valid?

2. The brief facts are these :--

'Sangham', an airconditioned cinema theatre situated in about 75 cents of land in the heart of the Calicut Corporation, with all fittings and fixtures, was sold in Court auction on 17-7-1978 for Rupees Twenty Thousand and ten subject to certain public and other charges. This sale is under challenge.

3. A money decree for Rs. 12,000/- and odd was obtained on 19-3-1976 in O.S. No. 220of 1973 on the file of the 1st Additional Sub Court, Ernakulam. While the suit was pending, there was an order for attachment before judgment on 19-9-1973 and it is said that the attachment was effected on 17-10-1973. An execution application was filed on 21-12-1977 in the Sub Court, Kozhikode, where it was transferred for execution and it was numbered as E.P. 2 of 1978. The properties attached, the cinema theatre and the land were brought to sale, on 17-7-1978 the sale proclamation having been settled on 13-6-1978. Two strangers bid and purchased at this auction.

4. The judgment-debtor filed an application to set, aside the sale. This application filed under Order XXI Rule 90, was within time. He specifically raised the contention that the sale held without leave of the Court appointing the receiver has to be ignored and the sale was not valid. The lower Court held that he should have raised this contention at an earlier stage of the execution and that no grounds to set aside the sale under Order XXI Rule 90 were made out. It did not consider whether the application was maintainable under Section 47 C.P.C. The application was dismissed on 21-12-1978 and the sale was confirmed on the same date. Aggrieved, the judgment-debtor has filed the appeal, C.M.A. No. 30 of 1979.

5. The judgment-debtor had long prior to the filing of the execution application on 21-12-1977 granted a lease of the cinema theatre to a lessee on 21-9-1977 receiving an advance of Rupees three lakhs fifty thousand and fixing a monthly rental of Rs. 10,000/-. Subsequently on 27-9-1979, the lessee entered into an agreement to purchase this property and other properties for Rupees Thirtyone lakhs. It is said that a further sum of Rs. 2 lakhs was given by the lessee to the judgment-debtor. This lessee filed on application, E.A. 160 of 1979, under Sections 47 and 151 of the C.P.C. for a declaration that the sale is invalid and that it did not convey any title to the auction purchaser. This application was filed on 5-2-1979.

6. Meanwhile, it is necessary to note that certain mortgagees of the property had filed three Original Suits 1238, 159 and 160 of 1975, in the Additional Sub Court, Kozhikode, and a receiver was appointed on 1-4-1978 inO.S. 159/75. He took charge on 5-4-1978 and the lessee was directed to attorn to the receiver. She then attorned as directed. But as the scope of the receiver order is itself in dispute, it is better to extract the relevant passages from that order.

'The only question which the Court has to look into is to see that the property is preserved and in that view, I am of the view that it is just and necessary to appoint a receiver.

It is stated that a lessee is in possession of the Sangam Theatre and its equipments and running the Cinema. Therefore, it is just and sufficient that the Receiver takes possession of the property symbolically and gets attornment from the lessee. The receiver will take charge of the properties and make an inventory of the machinery present belonging to the judgment-debtor and entrust them on kychit to the lessee. The lessee will be directed to attorn to the receiver and from the date of taking charge the receiver will direct the lessee to pay the rent in Court deposit to the credit of the suit.

In the result I appoint a receiver for the management of Sangam Theatre and he will act according to the directions in this order....'.

7. On 26-7-1979, the receiver also filed an application practically for the same relief as in E.A. 699 of 1979. Both the applications, E.A. 160 of 1979 and E. A. 699 of 1979 were allowed by the lower Court, holding that the sale, without obtaining leave of the Court, did not convey any title to the auction purchaser and in that view the sale was set aside. It is against this common order that the auction purchasers have filed a revision C.R.P. No. 3003 of 1980.

8. Thus the first question to be considered relates to the validity of sale when no permission is obtained from the Court appointing the receiver. It was contended on behalf of the revision petitioners that the receiver was appointed only to collect the rents and profits, that he did not obtain possession of the property, and thus the property was not in custodia legis.. The learned counsel relied on certain passages in an old decision in Maung Ohn Tin v. P.R.M.P.S.R.M. Chettyar Firm, AIR 1929 Rang 311 in support of this contention.

9. On a reading of the order appointingthe receiver, extracted above, it is evident that the receiver was appointed to preserve the property and was thus 'the hand of the Court' for this purpose. The lessee became the lessee of the receiver. She had attorned to the receiver as directed by Court. If the lessee did not deposit the rent in Court, the Court had ample powers to terminate the lease and direct the receiver to assume actual possession. The Court was in management of the property through the receives. In fact, the appointment was under Order 40 Rule 1 C.P.C. expressly committing the property to the possession and management of the receiver as provided in Clause (c) therein and for collection of rents and profits as provided in Clause (d) therein.

10. We have therefore no hesitation in holding that in this case the cinema theatre with the adjoining land was in custodia legis and that the receiver appointed by Court was in possession of the property when the sale was held.

11. Even then, we shall advert to the Rangoon decision in AIR 1929 Rang 311.

12. In that case, a receiver was appointed in respect of half interest or share in a mill.The receiver was not given notice when the mill was sold in Court auction. On the question whether the sale should be set aside, the Rangoon High Court observed thus : --

'We have not been referred to any provision of the Civil Procedure Code requiring notice to issue to a receiver of an estate, who has aninterest in the property in question but who is not himself in possession of such property. In the absence of such provision, we are unable to agree that the absence of notice to the Official Receiver was material irregularity or fraud in publishing or conducting the sale.'

13. It is this passage that is relied on tocontend that where possession is not given tothe receiver, no leave of Court is necessary.However, it is worthwhile to note that theJudges have also quoted passages fromWoodroffe and Amer Ali (3rd Edn.) readingthus:--

'The status of a receiver is merely that of an officer of the Court. He is sometimes referred to as the 'hand of the Court'. He acquires noproprietary rights or interest in the property of which he is appointed receiver. Having no title to the property he cannot convey or assign any title to it to any other person'.

'A receiver has no proprietary rights or interest whatever. Notwithstanding his appointment the proprietary rights in the estate remain in the persons who are by law entitled to the estate. The receiver's possession is not a possession by any personal right. It is the possession of the Court and he is totally devoid of any interest in the. property'.

14. Of courser proprietorship of the property does not vest in the receiver. Even then he continues to be an officer of Court and whether he gets actual or only symbolic possession, or he is appointed only to collect the rents and profits, a power which can be validly conferred under Order 40 Rule 1 C.P.C., he is still a receiver, in custody of the property. He receives rent not by virtue of any estate vested in him, but as an officer of Court authorised to collect the rent 'upon the title of persons who are parties to the action'. It is however, necessary to caution that a mere appointment of a receiver is not sufficient. He has to enter on management and take whatever possession he is entitled to. That custody cannot be defeated; the right, however restricted it may be, cannot be negatived by any other process without leave of that Court which appointed the receiver. If once the receiver is appointed in respect of certain properties, and he assumes management or takes possession, the question whether he has been appointed merely to collect rent and profits is not germane for the decision whether leave of the Court is necessary to proceed against those very same properties. We are thus in respectful disagreement with the view expressed by the Rangoon High Court.

15-16. There is no statutory provision (at least none was brought to our notice) which insists that leave of the Court which appointed the receiver should be obtained before the property in the custody of the receiver is brought to sale. Even then, it has been held as early as 1910 in Mrs. Levenia Ashton v. Madhabmoni Dasi (1910) 5 Ind Cas 390, thus: --

'The general rule is well settled that property in the hands of the receiver is exempt fromjudicial process, except of course permitted by the appointing Court.'

17. The reason for this principle is stated thus in the same decision.

'...While a levy upon property in thepossession of a Receiver may be punished byan appropriate procedure for contempt ofCourt, that is not the only remedy open to theparty aggrieved, but as the levy upon and saleof the property upon such circumstances, isabsolutely illegal because unauthorised by law,the sale may be avoided and possessionrecovered in any appropriate actioncommenced against the purchaser at theexecution sale or against any other person towhom possession of such property hascome.....'

It is unnecessary to refer to the catena of decisions cited at the bar. It is useful to cite two decisions of the Supreme Cpurt. In Kanhaiyalal v. Dr. D.R. Banaji AIR 1958 SC725 it was held thus :-

'....It is also settled law that proceedingstaken in respect of a property which is in the possession and management of a Receiver appointed by Court under Order 40, Rule 1 of the Code of Civil Procedure, without the leave of that Court, are illegal in the sense that the party proceeding against the property without the leave of the Court concerned, is liable to be committed for contempt of the Court, and that the proceedings so held, do not affect the interest in the hands of the Receiver who holds the property for the benefit of the party who, ultimately, may be adjudged by the Court to be entitled to the same'.

'The general rule that property in custodialegis through its duly appointed Receiver isexempt from judicial process except to theextent that the leave of that Court has beenobtained, is based on a very sound reason ofpublic policy, namely, that there should be noconflict of jurisdiction between differentCourts. If a Court has exercised its power toappoint a Receiver of a certain property, ithas done so with a view to preserving theproperty for the benefit of the rightful owneras judicially determined. If other Courts orTribunals of co-ordinate or exclusivejurisdiction were to permit proceedings to goon independently of the Court which hasplaced the custody of the property in the handsof the Receiver, there was a likelihood of coinfusion in the administration of justice and a possible conflict of jurisdiction. The Court represents the majesty of law, and naturally, therefore, would not do anything to weaken the rule of law, or to permit any proceedings which may have the effect of putting any party in jeopardy for contempt of Court for taking recourse to unauthorised legal proceedings. It is on that very sound principle that the ruleis based.'

18. In Everest Coal Company Pvt. Ltd. v. State of Bihar, AIR 1977 SC 2304 it was reiterated thus:--

'....When a Court put a Receiver in possession of property, the property comes under Court custody, the Receiver being merely an officer or agent of the Court. Any obstruction or interference with the Court's possession sounds in contempt of that Court. Any legal action in respect of that property is in a sense such an interference and invites the contempt penalty or likely invalidation of the suit or other proceedings.

XXX XXX. Any litigative disturbance of the Court's possession without its permission amounts to contempt of its authority; and the wages of contempt of Court in this jurisdiction may well be voidability of the whole proceeding..... Of course, failure to secure such leave till the end of the lis may prove fatal.'

19. It is thus clear that the Court is in possession of the property through the receiver. Any disturbance of this possession without notice to that Court and that receiver and without obtaining permission of that Court, naturally, is contempt of the lawful authority of that Court. The possession of the receiver by Court is thus immune from judicial process. If the property in the hands of the receiver is sold without leave of the Court which Appointed the receiver, the sale is illegal and is liable to be set aside in appropriate proceedings. The stamp of illegality vitiates the entire sale and the sale can be set aside on that sole ground.

20. In the present case, therefore, as the sale was held admittedly, without leave of the Sub-Court, Calicut, which appointed the receiver, the sale is liable to be set aside.

21. If the sale is liable to be set aside, is an application maintainable at the instance of the receiver? On the authority of Satyanarayan Banerji v. Kalyani Prosad AIR 1945 Cal 387 it is contended that the receiver who has no proprietary interest cannot file an application to set aside the sale. The relevant passage reads thus:--

'Were they, then, representatives of the judgment-debtors? In (19.09) Cal LJ 485, Mookerjee J. laid down two tests in order to determine whether a particular person is a representative of a party to the suit They are :--

'First, whether any portion of the interest of the decree-holder or of the judgment-debtor, which was originally vested in one of the parties to the suit, has, by act of parties or by operation of law, vested in the person who is sought to be treated as a representative, and secondly, if there has been a devolution of interest, whether, so far as such interest is concerned, that person is bound by the decree'. Clearly, the Receivers here did not satisfy any of these tests. They were Receiversappointed under Order 40, Rule 1, Civil P.C., and itis hardly necessary to cite any authority to showthat the appointment of such a Receiver,though it might operate to change possession,could not affect the title to the property, which remained in those in whom it was vested whenthe appointment was made. XXXXXXXXXPut shortly, the object of the appointment isnot to divest a rightful owner of the title, butonly to protect the property by takingpossession (Beach, Ss. 209 and 221). It couldnot be said, therefore, that the interest of thejudgment-debtors any more than that of thedecree-holders in any of the properties wasvested in the Joint Receivers here upon theirappointment, or that there was any devolution of interest in their favour.'

22. However, there is another decision ofan earlier Division Bench of the same Court inJagat Tarini Dasi v. Nabagopal Chaki (1907)ILR 34 Cal 305 wherein it is stated thus :--

'On the whole, we are disposed to take theview that, although a receiver is not the assignee or beneficial owner of the property entrusted to his care, it is an incomplete and inaccurate statement of his relations to the property to say that he is merely its custodian.When a Court has taken property into its owncharge and custody for the purpose ofadministration in accordance with the ultimaterights of the parties to the litigation it is in custodia legis.

The title of the property for the time being, and for the purposes of the administration, may, in a sense, be said to be in the Court. The receiver is appointed for the benefit of all concerned, he is the representative of the Court, and of all parties interested in the litigation, wherein he is appointed.'

These passages in this leading case were expressly approved in Venkata Mallayya v. T. Ramaswami & Co. AIR 1964 SC 818 with the following observations: --

'It seems to us that the view of the Calcutta High Court that a Receiver who is appointed with full powers to administer the property which is custodia legis or who is expressly authorised by the. Court to institute a suit for collection of the assets is entitled to institute a suit in his own name provided he does so in his capacity as a Receiver (sic). If any property is in custodia legis the contesting parties cannot deal with it in any manner, and, therefore, there must be some authority competent to deal with it, in the interest of the parties themselves'.

23. Thus when a property in the hands of the receiver appointed by Court is sold in Court auction, the receiver is a 'representative' entitled to maintain an appeal under Section 47 of the Code. The validity of the sale can thus be decided at his instance. AIR 1945 Cal 387 to the extent it takes a contrary view does not lay down the correct law in view of the Supreme Court ruling referred to above.

24. In these cases, therefore, the application E.A. 699 of 1979 filed by the receiver after obtaining permission from his Court was maintainable under Section 47 C.P.C. and the Court below was right in setting aside the sale. In this view it is really Unnecessary to consider the other application filed by the lessee for the same purpose or by the judgment-debtor under Order 21 Rule 90 C.P.C. However, as the lower Court has considered those applications as well and passed considered orders, and as they are challenged in these proceedings, we shall consider those applications as well.

25. The application by the judgment-debtor was under Order 21 Rule 90 C.P.G. This provision enables a sale to be set aside on the ground of material irregularity or fraud in publishing or conducting it. It is the material irregularity or fraud which affects the method and manner of publishing the proclamation and the actual conduct of the sale that clothes the Court with a jurisdiction to set aside the sale under Order 21 Rule 90 C.P.C. Where Order 21 Rule 90 applies, Section 47 is not available. However, where there is inherent illegality in the execution application, such as want of leave of Court appointing a receiver, it is a matter arising in execution, outside the purview of Order 21 Rule 90 and thus within the scope of Section 47 of the Code.

26. The Court below was therefore, wrong in considering the judgment debtor's application only under Order 21 Rule 90 when he had a specific case that the sale was invalid for want of leave of the Court which appointed the receiver and thus it should have considered the claim under Section 47 of the Code, even though this specific provision was not mentioned in the application. The application by the judgment-debtor, E.A. 580 of 1978, has also to be allowed and the sale set aside.

27. This application by the judgment-debtor was dismissed by the lower Court also on the ground that she should have raised this ground of want of leave at an earlier stage of the execution and thus she could not be allowed to raise this contention later under Order 21 Rule 90. The lower Court wrongly thought that this was a contention available under that provision. Moreover, an inherent illegality, when brought to the notice of theCourt, through an application maintainable in law, cannot be ignored so as to give validity to an otherwise invalid proceeding. The Court's aid is sought to set aside a sale conducted in contempt of the lawful authority of another Court and the Court cannot, in such circumstances, aid the contemner and refuse to set aside a sale on any technical ground of waiver of rights. There is no waiver either, for it is not a mere right of a party that is affected, but the larger public interest in upholding the dignity and orders of Court that is involved. The order of the lower Court on E.A. 580 of 1978 is reversed and the application allowedand the sale is set aside.

28. The other application is by the lessee, E. A. 160 of 1979. When the sale is already set aside at the instance of both the judgment-debtor and the receiver, an application by the lessee who contends that she has advanced about 3.50 lakhs for obtaining the lease and that she entered into an agreement for sale thereafter investing a further amount of Rs. two lakhs is unnecessary. She raised a contention that the attachment said to have been effected on 17-10-1973, when the suit O.S. 220 of 1973 was pending did not comply with Order 21 Rule 54(2) of the Code as it then stood and invited our attention to the report of the Amin and the evidence of R.W. 1. It is true that all the formalities prescribed by Order 21 Rule 54(2) were not complied with and that therefore the attachment itself was defective. The Court below has also considered this aspect in great detail. The invalidity of the attachment is in fact presed into service to support the validity of the lease for ensuring locus standi to file the application. It is unnecessary to consider this aspect (though we substantially agree with the reasoning of the lower Court) for, in any case, the lessee had attorned to the receiver as directed by the Sub Court, Calicut and thus had, in any case, locus standi as receiver's lessee to maintain the application. This lessee can also urge the invalidity of the sale and the lower Court was right in allowing her application, E.A. 160 of 1979. Her contention that there was violation of Order 21 Rule 67 C.P.C. in publishing the sale proclamation also need not be considered.

29. It was represented at the bar that after the sale was set aside by the lower Court, the judgment-debtor has paid the decretal amount in O.S. 220 of 1973 to the decree-holder and that the erstwhile lessee has purchased the rights of the judgment-debtor and discharged several liabilities charged on the property. We nee not pursue those facts in these cases.

30. The receiver and the lessee had also invoked Section 151 C.P.C. for setting aside the sale. Section 151 C.P.C. cannot be invoked where specific remedies are available either under Section 47 C.P.C. or under Order 21 Rule 90 C.P.C. and related rules.

In the result C.R.P. No. 3003 of 1980 is dismissed and the order of the lower Court setting aside the sale in E.A. 160 of 1979 and E.A. 699 of 1979 will stand affirmed.

C.M.A. No. 30 of 1979 is allowed and theorder of the lower Court confirming the saleshall stand set aside. No costs.


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