1. This is a plaintiff-appellant's application for the appointment of a receiver to collect the rents or the property which is the subject-matter of a purported simple mortgage during the pendency of the appeal before this Court.
2. Material facts leading to the present controversy are these. The defendants-respondents before us, on 19th September, 1950, secured a loan of Rs. 10,000/- from the plaintiff-appellant, mortgaged a property situate in Nasirabad and executed a registered deed. The mortgage was simple. The loan was to be repaid within two years and it bore interest at the rate of 12% per annum and in the event of there being a default in the payment of interest for three months the rate of interest to be charged was 15% per annum. The respondents only paid a sum of Rs. 1,200/- by way of interest on different dates and it appears that nothing was paid towards the principal. The plaintiff, therefore, instituted a suit for the sale of the mortgaged property. On the date of the suit the plaintiff-appellant's claim had reached the figure of Rs. 20,600/-, but he relinquisned Rs. 4,100/- and only claimed a relief for Rs. 16,500/-. During the pendency of the suit a receiver was appointed by the learned trial court who, it is said, collected a small sum of money. The suit was resisted by the defendants-respondents on various grounds. It was eventually dismissed because the trial court held that the document purported to be the mortgage deed was not duly attested and, therefore, no decree for sale could be granted. The relief for a personal decree, treating the deed as a registered bond, also could not be passed because such a remedy had become barred by time.
Aggrieved by this dismissal of his suit the plaintiff has come up in appeal to this Court. He has prayed that a receiver be appointed during the pendency of this appeal to collect the rents and profits of the property which is covered by the deed which forms the basis of the suit.
3. Two grounds have been urged for the appointment of a receiver by the appellant. Firstly, that on account of persistent default on the part of the defendants considerable interest has piled up on the loan advanced and secondly, the security has become and will increasingly become inadequate to meet the appellant's claim. The defendants-respondents have strongly resisted this request of the plaintiff-appellant. It is urged on their behalf that the relief for a personal decree being obviously barred by time the claim of the plaintiff-appellant rests only on the basis of a deed which is purported to be a simple mortgage. Therefore, what can possibly be claimed in a suit of this kind is the sale of the property alleged to be mortgaged and not its possession. No receiver can and should, therefore, be appointed in these circumstances.
4. Two questions evidently emerge for consideration. Firstly, whether this Court has power to appoint a receiver of the property which is the subject-matter of a simple mortgage; and secondly, should such power be exercised in the present case for the reasons urged by the plaintiff-appellant before us.
5. The power to appoint a receiver in India is derived from the provisions of Order 40, Rule 1 of the Civil Procedure Code. The guiding words for the exercise of this power, in our opinion, are 'just and convenient'. Where a court considers that a property which is the subject of a dispute between the litigating parties must be preserved pending the litigation, it may exercise its judicial discretion and appoint a receiver. Needless to say that such a discretion is to be exercised judicially and cautiously having regard to the entire set of circumstances in a given case.
6. Learned counsel for the parties have drawn our attention to the following reported decisions. Damodar v. Radhabai, AIR 1939 Bom 54; Ally Ramzan v. Balthazar and Son Ltd., AIR 1936 Rang 290, Venkenna v. Mangammal, AIR 1936 Rang 296; Kishenlal v. Rathan Singh, AIR 1954 Mys 162, Gobind Singh v. Punjab National Bank Ltd., AIR 1935 Lah 17, Rameshwar Singh v. Chuni Lal, AIR 1920 Cal 545, Krishna Kumar v. Maharaja Scindia, AIR 1956 Madh-B. 44, Sachidanand v. Sm. Kalawati, AIR 1956 Ajmer 51, Ma Joo Tean v. Collector of Rangoon, AIR 1934 Rang 321, Paramasivan v. Ramasami, AIR 1933 Mad 570, Firm Pahlad Dass Bhagwan Dass v. Shanti Sagar, AIR 1940 Lah 325, Mt. Sukharaniabai v. Laxmikantrao, AIR 1942 Nag 1 and Bireshwar Banerji v. Sudhansu Shekhar Singh, AIR 1947 All 157.
7. All these decided cases point to a consensus of opinion that a court in an appropriate case even if it happens to be one relating to a simple mortage has power to appoint a receiver. With this broad proposition there cannot be any dispute. We have already noticed that the legislature has conferred wide powers on the courts by virtue of the provisions of Order 40, Rule 1 of the Civil Procedure Code to appoint a receiver whenever it appears to a court that such an appointment is just and convenient. No limitation has been placed on the, court's power excepting that the circumstances of a given case warrant on the ground of justice and convenience that a receiver should be appointed. In our opinion, therefore, even in a case of a simple mortgage, if the circumstances of the case justify, a receiver can be appointed under the provisions of Order 40, Rule 1 of the Civil Procedure Code.
8. It is the second question which requires a closer examination. This aspect of the matter has been discussed by the High Court of Rangoon and Allahabad in AIR 1936 Rang 290, AIR 1936 Rang 296 and AIR 1947 All 157. AIR 1936 Rang 290 was the case of an equitable mortgage. A decree was passed in favour of the mortgagee. The property was brought to sale in execution of the decree but the proceeds of the sale were insufficient to cover the amount due under the mortgage. The mortgagee's right to obtain a personal decree against the mortgagor for the balance outstanding had become barred by time. A receiver was appointed and he collected a certain sum of money by way of rents and profits. The mortgagee claimed the said sum of money with the receiver. This was allowed to be given to the mortgagee on the ground that in England it was well-settled law that any equitable mortgagee's right to the sale proceeds is deemed to accrue from the date he claims to enforce his right of security by filing a suit in that behalf.
When interest is in arrear the court will normally appoint a receiver at the instance of the mortgagee and the reason for this appointment is that the delay which invariably and inevitably occurs on account of the procedure that must be followed before the sale of the property takes place and the right to the rents and profits of the property should accrue to the mortgagee from the date he institutes the action. A number of English authorities were considered and their Lordships came to the conclusion that the equitable doctrine which is applicable in England should be applied in accordance with the principle of equity, justice and good conscience. This decision was approved by the Special Bench in AIR 1936 Rang 296. In the Special Bench case their Lordships of the Rangoon High Court went a step further and held that even if the property is more than sufficient to cover the mortgage debt it is no ground to refuse the appointment of a receiver if interest on a mortgage was in arrears. On the other hand we have the decision of the Division Bench of the Allahabad High Court in AIR 1947 All 157. Mootham, J., as then he was, delivering the judgment of the Court held that in: India the simple mortgage is a creation of Statute. The mortgagor binds himself personally to pay the mortgage money and further he agrees that in the event of his failing to pay the dues in accordance with his contract the mortgagee shall have the right to cause the mortgaged property to be sold. The mortgagor retains possession of the mortgaged property, and in default of payment the right which accrues to the mortgagee is 'a right, not to possession by sale, which he must work out in execution proceedings.' Papamma Rao v. Vira Pratapa Korkonda, 23 Ind App 32 (PC). The learned Judge while holding that in a fit case the court has an undoubted right to appoint a receiver even at the instance of a simple mortgagee such a discretion cannot be exercised merely on the ground that the mortgagor has failed to pay interest on the mortgage money. He has held that the cases relating to equitable mortgages decided in England could not constitute a guide as the incidents of a simple mortgage are not the same as those which attach to an equitable mortgage in England. The learned Judge expressed the opinion that what is just and convenient in a given case must also be considered with reference to the contractual relationship of the parties. The right of the simple Mortgagee is to merely bring the mortgaged property to sale and he has no right to take possession of the mortgaged property nor to require the mortgagor to utilise the rents and profits of that property in payments of interest on the mortgage deed.
'The appointment of a receiver in such circumstances to take possession of rents and profits which do not form part of the security in order that such rents and profits may ultimately be made over to the mortgagee, confers upon the latter a benefit for which no provision is made in the contract and which the non-payment of interest, considered by itself, cannot justify.'
We are in respectful agreement with the views expressed by the learned Judge. We have to exercise our power in accordance with the law which confers it. We need not seek guidance from English authorities in the face of our statutory provisions and their accepted interpretation.
9. Where a plaintiff is asserting his right for the sale of the property and the defendant is in the enjoyment of that property, to deprive a defendant of his possession by interim judicial interference would be justified only on strong grounds. The two reasons which have been urged before us by the learned counsel for the appellant for the appointment of a receiver are, as we have already noticed, non-payment of interest and inadequacy of security. The plaintiff-appellant's case is that the mortgage secured by him was a simple mortgage. Under the Transfer of Property Act it consists of two parts: a covenant on the part of the mortgagor to pay the debt and an agreement empowering the mortgagee his money out of the property pledged to him. The pledgee must ordinarily obtain a decree directing a sale in order to make his security available. He is not put in possession of the property. He is not entitled to any rents and profits which the property yields during the subsistence of the mortgage. Mere failure on the part of the mortgagor to pay the interest on a simple mortgage, therefore, by itself is not sufficient to justify the appointment of a receiver. In so far as the ground of inadequacy of security is concerned, the only vague allegation in the application presented by the plaintiff-appellant is 'that the value of the mortgage property is much less than the amount of the claim preferred by the appellant.' As against this there is the affidavit of the respondent Ghisalal to the effect that the property bearing No. 711-B, which is the subject-matter of the purported mortgage deed, is over Rs. 30,000/-. Apart from this the plaintiff-appellant has already been non-suited and his remedy by way of a personal decree has been held to be barred by time--subject of course to the results of the appeal before us.
10. We are, therefore, of the opinion that while we have the power to appoint a receiver even in cases of a simple mortgage but having regard to the entire circumstances of this case it is not just and convenient to do so during the pendency of this appeal. The application is, therefore, dismissed.