1. This is a Letters Patent Appeal against the order of our brother Pandalai, J., in C.M.A. No. 375 of 1931. When the appeal came on for admission before our brothers Reilly and Venkatasubba Rao, JJ., while admitting it they directed it to be posted before a Bench of three Judges on the ground that the appeal raised a very important question on which conflicting views were expressed.
2. The facts of the case are as follows. The 1st defendant executed a deed of mortgage in favour of one Krishna Pillai on 30th May, 1924, for Rs. 20,000. The present 1st plaintiff is his brother, the 2nd and 3rd plaintiffs and the 7th defendant are his nephews and the 4th plaintiff is his grand-nephew. Krishna Pillai died and in the family arrangement entered into after his death the mortgage document fell to the share of the plaintiffs and the 7th defendant. The 2nd defendant is the undivided brother of the 1st defendant. The property that was originally mortgaged was the othi right in the suit properties created in favour of the 1st defendant by one Dathaprakasam Pillai but after the suit mortgage, i.e., on 28th November, 1928, defendants 1 and 2 purchased the whole proprietary right in the properties. The 3rd defendant is the son of the purchaser of the properties from defendants 1 and 2 under a sale deed dated 23rd February, 1929. Under the sale deed he was directed to pay Rs. 24,500 towards the suit debt. He offered to pay the said amount in complete discharge of the mortgage but the plaintiffs refused to accept it on the ground that more was due to them with the result that the amount remained unpaid. On the 29th September, 1930, a preliminary decree was passed in favour of the plaintiffs for Rs. 20,000 with interest at the rate of 131/2 per cent, per annum from the date of the plaint which amounted to nearly Rs. 37,000. In August, 1931, the plaintiffs applied for the appointment of a Receiver of the suit properties on the ground that the properties were scarcely enough for discharging the decree and that there was no other means of realising the decree amount. The Subordinate Judge passed an order holding that this was a fit case for the appointment of a Receiver and directed the Receiver to take possession of the properties from 1st November, 1931, There was an appeal to the High Court by the 3rd defendant and it was followed by an application for the stay of the order of the Subordinate Judge. The order was stayed on the appellant giving security. The matter came on before our brother Pandalai, J., who reversed the order of the Subordinate Judge on 21st September, 1932. This Letters Patent Appeal comes on before us in due course.
3. The Subordinate Judge found that after the purchase by the 3rd defendant nothing was paid to the plaintiffs. He disbelieved the 3rd defendant's story that the plaintiffs refused to receive the amount on account of dissensions among themselves. He observed that there was a prior application for the appointment of a Receiver during the pendency of the suit and that it was dismissed but he thought that this circumstance did not matter as at the time of the present application a much larger amount was due to the plaintiffs than at the time of the earlier application. It also appeared that the value of the hypotheca was going down day by day. The 3rd defendant also relied on the fact that the plaintiffs gave up their right to get a personal decree against the mortgagors but the Subordinate Judge thought that that circumstance did not matter. On appeal our brother Pandalai, J., observed:
If this appeal depended on the above or similar considerations which affect Receiver applications in ordinary simple mortgage suits, I should have no hesitation in confirming the order of the learned Judge.
4. He referred to Khubsurat Koer v. Saroda Charan Guha (1911) 14 C.L.J. 526 and Rameshwar Singh v. Chuni Lal Shaha I.L.R.(1919) 47 Cal. 418 referred to with approval in Maharajah of Pittapuram v. Gokuldoss Goverdhandoss : AIR1931Mad626 . He finally concluded thus:
I am satisfied that the likelihood is that the property will not be enough for the mortgage debt and that the appellant realising this is trying to delay the realisation of the debt as long as possible as it is profitable for him to do so. On the merits I am against the appellant.
5. But he thought he ought to allow the appeal on the ground that the plaintiffs having given up their right to personal remedies against the mortgagors the application for the appointment of a Receiver amounted to an attempt to get through the machinery of Receiver what they had given up. He therefore allowed the appeal.
6. Mr. Ramabhadra Aiyar for the respondent took two preliminary objections to the hearing of this appeal. First, he relied on the fact that the property has since been brought to sale and purchased by the decree-holder and therefore this appeal is infructuous and is merely academic. To this the appellant replies that the Receiver not having been allowed to take possession of the property in accordance with the order of the Subordinate Judge he is entitled to the profits of the property for the interval between the order of appointment and the purchase by him in auction and if he succeeds in this appeal he can recover it by realising the security furnished by the 3rd defendant. There is no reply to this argument of the appellant. And though it is a pity that this appeal which has taken considerable time has to be heard solely for the purpose of settling the dispute about the profits for about a year, still we cannot refuse to hear the appeal as the learned Judges who referred the appeal observed that the point involved was an important one.
7. Secondly, Mr. Ramabhadra Aiyar contended that under Order 43, Rule 1 the order of Pandalai, J., was final and no Letters Patent Appeal lay against his order. This question was the subject of consideration by several Judges of this Court under the old Code and though at one time a different rule prevailed vide Vasudeva Upadyaya v. Visvaraja Thirthasami I.L.R.(1897) 20 Mad. 407 after the Full Bench decision in Chappan v. Moidin Kutti : (1898)8MLJ231 which was a decision of six Judges and where all the prior cases were considered and the later case, Muthuvaien v. Periasami Iyen : (1903)13MLJ497 , the practice of this Court has been uniformly to hold that the Civil Procedure Code does not control the section of the Letters Patent. That principle has been applied in other decisions of this Court, for example Dhanaraju v. Balakissendas Motilal : AIR1929Mad641 . It is true that the Allahabad High Court has been always following a different rule both under the new Code and under the old Code, but the practice of this Court has been different. There is nothing in the language of the new Code to show that the legislature intended to lay down a principle different from that in the old Code.
8. The preliminary objections are overruled.
9. Coming to the merits of the case, the earliest decision of this Court on this matter is that in Arunachellam Chettiar v. Manicka Varaher Desikar (1909) 6 M.L.T. 238. The question was not elaborately examined in that case. The matter next came up for discussion before Oldfield and Sadasiva Aiyar, JJ., in Venkata Rajah Gopala Surya Row Bahadur v. Basivi Reddi (1914) 29 M.L.J. 457. Oldfield, J., referred to the English cases. He pointed out that in In re Pope (1886) 17 Q.B.D. 743 it was said that a Court of Equity would not grant a Receiver where the party applying had a legal right to possession: an equitable mortgagee could get a Receiver but a legal mortgagee could not before the Judicature Act. It would now seem that in England after the Judicature Act even a legal mortgagee can get a Receiver. He referred to some decisions under the Code of 1882 and distinguished them on that ground. The present Order 40, Rule 1 uses language much wider than the language of the old Code, the words 'just and convenient' being adopted from the Judicature Act. Then after referring to the case in Arunachellam Chettiar v. Manicka Varaher Desikar (1909) 6 M.L.T. 238 he relied on Weatherall v. Eastern Mortgage Agency Co. (1911) 13 C.L.J. 495 The Eastern Mortgage & Agency Co. Ltd. v. Rakea Khatun 16 C.W.N. 997 : I.C. 202 and Khubsurat Koer v. Saroda Charan Guha (1911) 16 Cal. W.N. 126 : 14 C.L.J. 526. In the first two cases the Court held that default in payment of interest justified the appointment of a Receiver. In Khubsurat Koer v. Saroda Charan Guha (1911) 16 Cal. W.N. 126 : 14 C.L.J. 526 the appointment of a Receiver was refused on the ground that there was a decree for foreclosure but the Court said that if it had been for sale and if it had been established that the security was not sufficient to satisfy the judgment debt, a Receiver would have been appointed almost as a matter of course, especially if there was default in payment of interest. The other learned Judge Sadasiva Aiyar, J. held that as under that particular decree the right of the mortgagee to proceed against the other properties was barred, it was not a fit case for the appointment of a Receiver for rents and profits. It does not appear that the learned Judge meant to lay down any general rule of law that where a decree for sale has been obtained on a simple mortgage no Receiver should be appointed or even where the personal remedy against the mortgagor did not exist there should never be a Receiver. The learned Judge's language seems to indicate that on the particular facts of that case he thought it was not a fit and proper case for the appointment of a Receiver.
10. In the present case the 3rd defendant purchased the property with knowledge of the prior mortgage of the plaintiffs and obviously it was intended that he should discharge the mortgage debt due to them. Unfortunately there seems to have been a mistake in calculation because the vendors said only Rs. 24,500 was due and asked the vendee to pay the amount who offered only that amount but it turned out that more was due to the plaintiffs and if his purchase of the property was to completely enure to his benefit it was the vendee's duty to pay off the whole of the prior mortgage debt. An arithmetical error on the part of the vendor does not justify the debt being allowed to remain unpaid and from that date up to this the fact remains that not even interest was paid and the ' debt still remains unpaid. Under these circumstances the mortgagees having primarily to look to the mortgage property as security and the mortgagors and the 3rd defendant having intended that the 3rd defendant should pay off the debt, it is futile to urge in this case that the mortgagees having given up their personal remedy against the mortgagors that should be a circumstance against the appointment of a Receiver. In my opinion that circumstance has no bearing on the question whether a Receiver should be appointed for the property now in the hands of the 3rd defendant he having undertaken the payment of the debt.
11. In Ethirajulu Chetti v. Rajagopalachariyar I.L.R.(1928) 52 Mad. 979 : 56 M.L.J. 115 the whole question was examined by Kumaraswami Sastri, I., and the learned Judge came to the conclusion that a Receiver could be appointed on the application of a simple mortgagee and all the earlier English and Indian decisions were elaborately discussed.
12. In Maharajah of Pittapuram v. Gokuldoss Goverdhandoss : AIR1931Mad626 this decision was followed by Madhavan Nair, J. It is true that Madhavan Nair, J.'s judgment is distinguishable as pointed out by Terrell, C.J., in Nrisingha Charan v. Rajniti : AIR1932Pat360 . The actual question before him was not whether a Receiver should be appointed but a Receiver having been previously appointed at the instance of the mortgagee the rents and profits should be applied for his benefit but the fact still remains that the learned Judge agreed with the earlier decision of Kumaraswami Sastri, J.
13. In Rameshwar Singh v. Chuni Lal Shaha I.L.R.(1919) 47 Cal. 418 also the same view was taken though that case may be distinguished just as the decision of Madhavan Nair, J., was distinguished on the ground that there was a prior order for the appointment of Receiver.
14. The decision in Khoo Joo Tin v. Ma Sein I.L.R.(1928) 6 Rang. 261 is also in favour of the same view but as that decision is based upon an earlier ruling of the Burma Chief Court by which the learned Judges held themselves to be bound it is unnecessary to refer to it any further.
15. The decision of our brothers Venkatasubba Rao and Reilly, JJ. Ponnu Chettiar v. Sambasiva Aiyar (1932) 64 M.L.J. 682 in which some of these cases are referred to was also a case where the appointment of a Receiver had been previously obtained. Reilly, J. made observations in that judgment warning against the danger of relying on English decisions on mortgages and applying them to India. I agree that the English decisions ought to be used with great caution. There are observations in that judgment to the effect that a simple mortgagee can obtain the appointment of a Receiver only in cases where the personal remedy subsists. The point did not arise in the case.
16. Two decisions which are opposed to the series of authorities referred to above may now be mentioned. One is Gobind Ram v. Jwala Pershad (1917) 43 I.C. 533 a decision of Sir Henry Richards, C.J., and Banerji, J. It was held that a simple mortgagee cannot obtain the appointment of a Receiver and that the mortgagor is entitled to remain in possession until the property was sold. The other is a recent decision of Terrell, C.J., and Fazl Ali, J., in Nrisingha Charan v. Rajniti : AIR1932Pat360 already referred to. In the first of these cases the underlying idea was that the right to the appointment of a Receiver depended on the right to obtain possession. Now it is true, as has been observed in some of these cases, the right of a simple mortgagee is primarily to proceed against the secured property and not against the other properties of the mortgagor unless there is a personal remedy. If the personal remedy is lost, there is no right to proceed against the other properties of the mortgagor. It is also true that a simple mortgagee is not entitled to possession of the mortgage property as a mortgagee. But where a mortgagee seeks to obtain the appointment of a Receiver he does not proceed against the other properties of the mortgagor but wants to proceed against the mortgage property itself. The underlying idea in the opposite view is that the profits of the property not being mortgaged the mortgagee is really trying to proceed against property other than the mortgage property. But if the idea is carefully examined it seems to me there is a fallacy. In the first place the mortgagee never seeks to obtain possession for himself. Secondly, the attempt to place the property in the hands of the Receiver is really proceeding against the property so as to utilise it for the discharge of the debt. Now profits of property are an accession to the property and proceed out of it. When the property is taken from the hands of the mortgagor and placed in the hands of the Receiver, the Receiver has to get it cultivated and derive income from it and that income has to be utilised for the benefit of the mortgagee. It is not that the fruits of the mortgagor's labour bestowed on his land is to be taken away from him. If the crops on the mortgage property were raised by him, it may be said that is proceeding against property other than the mortgage property. But where the property itself is taken away from his hands and is kept in the Receiver's hands who has to make arrangements for its being cultivated and ultimately get profits from it, the whole proceeding is a proceeding against the mortgage property.
17. The matter can be looked at from another point of view. If a decree is promptly passed and the property is sold, the amount realised by the sale goes to the benefit of the mortgagee and from the time he receives the amount he gets interest on it. But instead of the sale promptly following the suit if there is delay, during all the time the sale is delayed the mortgagor will be enjoying the profits of the property which would have been enjoyed by the mortgagee in the shape of interest on the mortgage money if there had been an early sale. The profits of the property correspond to the interest on the money when once it is sold and converted into money; and wherever the mortgagor does not keep down the interest, he is really enjoying the profits of the property which in one sense represent the property which would have belonged to the mortgagee but for the delay. Anyhow it is not correct to say, where the attempt is to realise the debt secured out of the profits of the property and appropriate it towards the mortgage debt, it is the same as proceeding against other property. For these reasons I am not able to agree with the decision in Gobind Ram v. Jwala Pershad (1917) 43 I.C. 533. The reasoning of Terrell, C.J., in the Patna decision proceeds on a somewhat different line. His judgment proceeds on the ground that an equitable mortgagee's right to get a Receiver appointed was based on his right to be put by the Court into the position of a legal mortgagee. In the first place the passages in Coote on Mortgage where the position of an equitable mortgagee is discussed show that unless there is an express covenant for getting possession under Certain circumstances the equitable mortgagee is not entitled to possession and it would not be correct to say that the English decisions allowing a Receiver to be appointed in the case of an equitable mortgage depended on his right to possession. On the other hand the observations in In re Pope (1886) 17 Q.B.D. 743 show that the appointment of a Receiver in the case of an equitable mortgage was based on just the opposite ground. It is because an equitable mortgagee is not entitled to possession it was said that a Receiver should be appointed and it was refused in the case of a legal mortgage. Whatever may be the position of an equitable mortgagee under English law, an equitable mortgagee under Indian law is merely a creature of the Transfer of Property Act. Under the Transfer of Property Act an equitable mortgagee has no right to possession. His only right is to obtain a decree for sale. I am not aware of any decision where it has been held that an equitable mortgagee is entitled to ask and demand possession of the mortgage property. I am therefore unable to concur with the statement of Terrell, C.J.:
The same difference therefore between a simple mortgagee under Indian Law and a legal mortgagee under English Law exists between a simple mortgagee and an equitable mortgagee.
18. Far from there being such a difference at least in the matter of obtaining possession, a simple mortgagee and an equitable mortgagee seem to stand on the same footing. In both, the mortgagee is not entitled to possession and it is on the consideration that a mortgagor who continues to enjoy the property without paying down the interest from out of the profits of the property may be said to be from an equitable point of view committing a breach of his undertaking and where there are other circumstances such as the property being insufficient that Courts have to proceed to appoint Receivers in the case of equitable mortgages. The Madras and Calcutta cases appointing Receivers in the case of equitable mortgages cannot be distinguished on the ground suggested by Terrell, C.J. The other learned Judge Fazl Ali, J., agrees with the conclusion and has based his reasons on the ground that the case before him was not a fit one for the appointment of a Receiver. He said nothing on the right of a simple mortgagee or an equitable mortgagee. For these reasons with great deference, I am unable to agree with the Allahabad and Patna decisions referred to above and agree with the large current of authority in favour of the appointment of a Receiver even in the case of a simple mortgage. The decision in Rajah Satrucherla Gangaraju v. Rajah of Jeypore (1925) 23 L.W. 650 is a case where the Judges thought that, on the facts, it was not a case for the appointment of a Receiver of property other than the mortgage property and lays down no proposition of law. Of course I must not be understood as saying that a simple mortgagee is entitled to the appointment of a Receiver as a matter of course. During the pendency of the suit there may be questions about the proof of the document itself and even after the decree the circumstances may not be such as to entitle him to such an appointment. Where interest is allowed to accumulate into heavy arrears, and the security became inadequate thereby I should say that such a case may be a fit one for the appointment of a Receiver. Again where a defendant mortgagor or a purchaser from him undertakes to pay the interest during the pendency of the suit and until the property is brought to sale, the appointment of a Receiver ought to be refused. But where a person in the position of the 3rd defendant in this case has not paid any amount for several years towards the mortgage debt and where, as has been found by the Subordinate Judge and Pandalai, J., there are no merits in favour of the appellant that would be a fit case for the appointment of a Receiver.
19. The learned advocate for the respondent relied on a case in 62 M.L.J. 35 (short notes) - an interlocutory order of Curgenven, J. But that case merely illustrates what I said. In that case the learned Judge directed that the interest should be paid regularly and observed that no Receiver should be appointed so long as that direction was obeyed.
20. A decision of myself and Jackson, J., in Shri Devi Amma v. Valia Narayan : AIR1929Mad20 was referred to as showing that a simple mortgagee has no right to the appointment of a Receiver. What we meant in that case was that he has no absolute right to insist on the appointment of a Receiver and not that if the circumstances were such the Court may not exercise the discretion in appointing a Receiver. We simply decided in that case that no appeal lay and we were trying to show that there was no hardship by so holding. That case does not help the respondent.
21. In my opinion a simple mortgagee is not disentitled to obtain the appointment of a Receiver if the other circumstances are such as to justify it merely on the ground that no personal remedy subsists to proceed against the other properties of the mortgagor. The appointment of a Receiver is only a mode of execution (Section 51 of the Code) - to be used, no doubt, with caution and sound judicial discretion. It was ordered by the Judicial Committee in a simple money decree Vibhudapriya v. Lakshmindra . Why should the simple mortgagee be in a worse position than the holder of a money decree? If it is said that he has taken property as security, what about the case when it has become insufficient? I would therefore allow this appeal with costs before us and Pandalai, J. The costs will be assessed on the amount of Rs. 1,600 (vide C.M.P. No. 31 of 1933), i.e., he will get the minimum fee.
Anantakrishna Aiyar, J.
22. This Letters Patent Appeal has been preferred against the decision of Justice Krishnan Pandalai in C.M.A. No. 375 of 1931, in which, though the learned Judge held on the merits that a case for the appointment of a Receiver had been made out, yet, he reversed the order of the Subordinate Judge of Tuticorin appointing a Receiver in respect of the property which was the subject-matter of the mortgage suit, on the ground that the Court had no jurisdiction to appoint a Receiver since the plaintiffs had given up right to personal relief against the mortgagor.
23. The 1st defendant executed a simple mortgage on 30th May, 1924, for Rs. 20,000 in favour of the joint family represented by the plaintiffs in the suit. The mortgagor sold the equity of redemption to the 3rd defendant on 23rd February, 1929. The suit was instituted on 6th September, 1929, to recover the amount due on the mortgage. As interest had not been paid for a long period, the amount due on the date of the preliminary decree on 29th September, 1930, in respect of principal and interest came to nearly Rs. 37,000. On 14th August, 1931, an application (I.A. No. 346 of 1931) was filed by the plaintiffs to have a Receiver appointed in respect of the mortgage properties. The application was made on the grounds, among others, that the value of the suit properties was going down day by day, that the present value of the suit properties was not sufficient to meet the decree amount, that interest had not been paid for years, and that the 3rd defendant, who had undertaken in the sale deed taken by him from the mortgagor to pay off the plaintiffs' mortgage and also to pay interest to the plaintiffs, had not done so but was trying to prolong litigation with a view to enjoy the income of the properties for as long a period as possible. The mortgage properties consisted of a compound and twenty houses in Tuticorin yielding a gross annual rent of Rs. 2,316 and a net income of about Rs. 1,300. The Subordinate Judge of Tuticorin appointed a Receiver by his order dated 16th October, 1931. The learned Subordinate Judge did not place any reliance on the other allegations made in the petition that the 3rd defendant had not been making any repairs to the property but was allowing them to deteriorate. On the grounds that the price of the properties had greatly deteriorated after the date of the mortgage, that interest had not been paid for several years, that the properties if sold were not likely to realise anything like the amount due to the plaintiffs, and that the 3rd defendant, who had undertaken in the deed of sale executed by the 1st defendant in his favour on 23rd February, 1929, to discharge the plaintiffs' mortgage and also pay interest to the plaintiffs, had not done so, but was enjoying all the income of the properties himself, the learned Subordinate Judge came to the conclusion that it was a fit case for the appointment of a Receiver to collect the rents and deposit the same in Court as it was just and convenient in the circumstances to do so.
24. The 3rd defendant preferred C.M.A. No. 375 of 1931 to the High Court against the order of the learned Subordinate Judge appointing a Receiver. Justice Krishnan Pandalai who heard the appeal, after noticing the circumstances of the case, came to the conclusion that a case for the appointment of a Receiver was made out, provided the Court had jurisdiction to pass such an order. The learned Judge observed as follows:
If this appeal depended on the above or similar considerations which affect receiver applications in ordinary simple mortgage suits, I should have no hesitation in confirming the order of the learned Subordinate Judge. If the decree is for sale and if it be established that the security is not sufficient to satisfy the judgment-debt, a receiver will be appointed as a matter of course, especially if there has been default in payment of interest. I am satisfied that the likelihood is that the property will not be enough for the mortgage-debt, and that the appellant realising this is trying to delay the realisation of the debt as long as possible as it is profitable for him to do so. On the merits I am against the appellant.
25. Finding however that the plaintiffs had given up their rights to personal remedy against the mortgagors and therefore not entitled to proceed against their other properties for any deficiency that may arise on the sale, the learned Judge came to the conclusion that in such circumstances the Court had no jurisdiction to appoint a Receiver, as it would amount to allowing the plaintiffs through the machinery of a Receiver to take what they have given up and are not legally entitled to get. Accordingly, the learned Judge allowed the appeal and dismissed the application of the plaintiffs. The plaintiffs have preferred this Letters Patent Appeal against the learned Judge's decision.
26. A preliminary objection was taken by the learned advocate for the respondent (3rd defendant) that, having regard to the provisions of Section 104, Civil Procedure Code, no further appeal lay from the judgment of the learned Judge in an appeal preferred under Order 43, Rule 1, Clause (s), Civil Procedure Code. He argued that only one appeal lay against the order passed by the Subordinate Judge, under Order 43, Rule 1, Clause (s), Civil Procedure Code, but that no further appeal lay from an order passed in such an appeal, having regard to the provisions of Section 104(2), Civil Procedure Code. The appeal before us was preferred under the provisions of Section 15 of the Letters Patent of this High Court.
27. The question whether an appeal lies under Clause 15 of the Letters Patent against the judgment of a single Judge of the High Court passed on an appeal preferred to the High Court under Order 43, Civil Procedure Code (corresponding to Section 588 of the earlier Code), has been the subject of discussion in some cases in this Court. The decision of Boddam and Bhashyam Aiyangar, JJ., in Muthuvaien v. Periasami Iyen : (1903)13MLJ497 , is directly against the contention raised by the respondent before us. The learned Judges, after noticing the reasoning of the Full Bench of this High Court, in the case reported in Chappan v. Moidin Kutti : (1898)8MLJ231 of the Privy Council decision in Hurrish Chunder Chowdhry v. Kalisundari Debi and of the decision of a Bench of this Court in Sabapathi v. Narayanasami I.L.R.(1901) 25 Mad. 555 : (1901) 11 M.L.J. 346 came to the conclusion that the provisions of the Letters Patent prevailed, and that an appeal lay from the judgment of one Judge of the High Court in such cases. It was remarked that the prohibition contained in the Code of Civil Procedure related only to the entertainment of a further appeal by another Court of a higher grade in such cases, and that the provisions of the Letters Patent conferring a right of appeal from the judgment of one Judge of the High Court to the same Court were not in any way interfered with by the provisions of the Code of Civil Procedure. That view has been accepted all along in this Court, though the Allahabad High Court would seem to be of a different opinion Sri Kishen v. Ishri I.L.R.(1982) 14 A 223 and Piari Lal v. Madan Lal I.L.R.(1916) 39 A 191. See also the decision of the Full Bench in Dhanaraju v. Sait Balakissendas Motilal : AIR1929Mad641 where it was held that the procedure to be adopted by the High Court in the case of an equal division of opinion among the Judges of the High Court in an appeal preferred to it under the Code of Civil Procedure is governed by the Letters Patent and not by the Code of Civil Procedure.
28. Having considered the provisions of Section 588 of the old Code on the one hand, and Section 104 and Order 43 of the present Code on the other, I do not think that there is any sufficient ground for holding that the decision in Muthuvaien v. Periasami Iyen : (1903)13MLJ497 should not govern judgments passed under the present Code of Civil Procedure, by a learned Judge of this Court in an appeal preferred under Order 43, Civil Procedure Code. I have no hesitation in overruling the preliminary objection. The matter has been fully discussed in the decisions already cited, and I do not propose to say anything more on the point.
29. The substantial question in the appeal is whether the Court has jurisdiction, in a case where personal relief against the mortgagor and his other properties has been given up by the mortgagee, to order the appointment of a Receiver in the suit of a simple mortgagee. The preliminary decree passed by the Lower Court on 29th September, 1930, no doubt contains a statement that the mortgagees had given up their right to personal relief against the other properties of the mortgagor. The mortgage sued on is dated 30th May, 1924, and the suit was filed on 6th September, 1929, i.e., within six years from the date of the mortgage, and therefore it is rather difficult to understand the circumstances under which the plaintiff's pleader gave up the plaintiff's right to personal relief against the other properties of the mortgagor; but, in the face of the statement, above referred to, in the preliminary decree dated 29th September, 1930, passed in this case, we must take it that the recital in the decree is correct. The question therefore is whether the order passed by the Subordinate Judge appointing a Receiver over the mortgage properties was passed without jurisdiction having regard to the fact that the plaintiffs had given up their right to personal relief against the mortgagors and their other properties.
30. It must be taken to be settled law in this Court at present that though a simple mortgage does not carry with it right to possession, and though a simple mortgagee's remedy is only by way of sale of the mortgage property, yet, the Court has jurisdiction, in a suit brought by a simple mortgagee to recover money, to appoint a Receiver, in a proper case. The decision of Justice Kumaraswami Sastriar in Ethirajulu Chetti v. Rajagopalachariyar I.L.R.(1928) mad. 979 : 56 M.L.J. 115 has made that position clear, after reviewing the earlier authorities on the point. The learned Judge notices the provisions of Order 40, Rule 1, Civil Procedure Code and also of Section 503 of the Code of 1882. The learned Judge came to the conclusion that, whether the mortgagee was or was not entitled to possession, he may invite the Court to appoint a Receiver if the demands of justice require that the mortgagor should be deprived of possession. While observing that it is impossible to lay down a hard and fast rule enumerating the circumstances under which alone the Court will appoint a Receiver in respect of property subject to a simple mortgage, the learned Judge held that where on account of circumstances created either by the conduct of the mortgagor or connected with the state of the property, the mortgagee is likely to sustain loss not foreseen by him at the time he took the simple mortgage, the Court will have jurisdiction to appoint a Receiver to take possession of the property for the benefit of the mortgagee. In the case before the learned Judge, the default of the mortgagor in paying the interest and the fall in value of the mortgage property were taken by the learned Judge to be facts constituting it 'just and reasonable' that a Receiver should be appointed.
31. The decision in Ethirajulu Chetti v. Rajagopalachariyar I.L.R.(1928) 52 Mad. 979 : 56 M.L.J. 115 has been followed in numerous cases in this Court, though learned Judges have always made it clear that under the Indian Law it is not one of the ordinary remedies of a simple mortgagee who has filed a suit on his mortgage to have a Receiver appointed as a matter of course in respect of the mortgage properties, but that the Court would appoint a Receiver only in. special circumstances when it considered it 'just and convenient' to do so. It is not necessary at present to refer to the earlier cases where the law to the same effect has been laid down by Courts in India. See Arunachellam Chettiar v. Manicka Varaher Desikar (1909) 6 M.L.T. 238 Ghanashyam Misser v. Gobinda Moni Dasi (1902) 7 Cal. W.N. 452 Weatherall v. Eastern Mortgage Agency Co. (1911) 13 Cal. L.J. 495 Rameshwar Singh v. Chuni Lal Shaha I.L.R.(1919) 47 Cal. 418 Musstt. Khubsurat Kuer v. Saroda Charan Guha (1911) 16 Cal. W.N. 126 The Eastern Mortgage and Agency Co. Limited v. Rakea Khatun (1912) 16 Cal. W.N. 997 and Jaikissondas Gangadas v. Zenabai and Kazi Mahomed Miya Dada Miya I.L.R.(1890) 14 Bom. 431. The wordings of Section 503 of the Code of 1882 relating to the appointment of a Receiver were different from the wordings of Order 40, Rule 1 of the present Code. Under the present Code, the Court could appoint a Receiver if it appears to it to be 'just and convenient' to do so. No doubt 'the Court could not order the removal from the possession or custody of property any person whom any party to the suit has not a present right so to remove'. But the jurisdiction of the Court to appoint a Receiver under the present Code is very wide. That discretion, though very wide, should be exercised on well-established principles of law, and not simply according to the whim and caprice of individual Judges.
32. In my view, the circumstance that a simple mortgagee in India under the provisions of the Transfer of Property Act is not entitled to possession of the mortgage property even on default of payment of the mortgage money, see the observations of Lord Hobhouse in Sri Raja Papamma Rao v. Ramachandra Rasu to the effect that
If indeed the matter were new, it might reasonably be argued that the terms of a simple mortgage justify usufructuary possession; but long practice, now embodied in a statute, has settled that the remedy of the mortgagee is a judicial sale
does not necessitate the conclusion that the Court has no jurisdiction to appoint a Receiver over the mortgage properties in a suit brought to enforce the simple mortgage, should it consider just and convenient to do so. No doubt a simple mortgagee is not entitled to possession. His only right is to have a sale of the mortgage properties; but when the object of the suit is to have a sale of the mortgage properties, but, owing to inevitable delay in litigation the same could not be ordered at once, and other circumstances such as those found in the present case exist, it does not follow that the Court could not order the appointment of a Receiver in such a case if it considered it just and proper to do so. It is only regarding the property which was mortgaged to the plaintiff that the Court appoints a Receiver in such a case. The circumstance that the right of the mortgagee to have personal relief against the mortgagor and his other properties has been given up, or has become barred by limitation or does not exist in particular cases, is no ground by itself to hold that the Court has no jurisdiction to appoint a Receiver in such cases. The order appointing Receiver affects only the mortgage property which is the subject of the suit, and not any other property of the mortgagor. The delay in litigation could not always be imputed to the plaintiff; it is well known that defendants also in several cases contribute to the delay in the disposal of the suit. As a matter of fact, in the present case, it is found by the learned Judge of this Court, and also by the Subordinate Judge, that the 3rd defendant has allowed interest to accumulate and is only anxious to continue in possession for as long a period as possible with the sole view of enjoying the income of the properties, thus causing prejudice to the plaintiffs.
33. It is admitted that in case of waste, or destruction of the mortgage property, or when revenue or head-rent is not paid, the Court has jurisdiction to appoint a Receiver over the mortgage property. But does this exhaust the jurisdiction of the Court to appoint a Receiver in mortgage suits, though those would undoubtedly be cases in which Courts would more readily appoint a Receiver.
34. In discussing the question, one must keep separate two questions: - (1) Whether the Court has jurisdiction, and (2) Whether the Court should in a particular case appoint a Receiver in the exercise of its jurisdiction.
35. Prima facie, if the Court could appoint a Receiver over the mortgage property in some cases in a suit on a simple mortgage, it would surely indicate that the Court has jurisdiction to appoint Receiver over the mortgage property as such; and the other question whether in a particular case it would make the order or not would be one dependent entirely on the particular circumstances of that case. We should not mix the two questions, especially when one of them relates to the very existence of jurisdiction in such a suit in certain circumstances.
36. As already stated, the question is not whether the plaintiff has a strict legal right to have a Receiver appointed in such a case as the one before us. Even in a case where there was a specific agreement between parties that on the happening of a particular event, one of the parties was entitled to have a Receiver appointed, the Court held that it was entirely a matter of discretion with Courts whether a Receiver should be appointed in any particular case or not. It therefore seems to me that it is attacking the problem from a wrong end to say that because a simple mortgagee is not entitled to possession, therefore the Court has no jurisdiction to appoint a Receiver, that because right to personal relief is given up, therefore the Court has no jurisdiction to appoint a Receiver in respect of the mortgage property.
37. I agree with the learned Judges of this Court who have often remarked that in cases of mortgages, Courts in India should be very careful before implicitly following English decisions passed with reference to mortgage-law in force in England. In England, a simple mortgagee is entitled to take possession of the mortgage properties on the mortgagor's default to pay the mortgage debt at the stipulated period. Being in a position to take possession of the mortgage property, English Courts were reluctant at one stage to appoint a Receiver at the instance of a simple mortgagee. As remarked by Dr. Ghose in his Law of Mortgage in India, 4th Edition, Vol. I, page 590,
the position of a mortgagee in possession is so full of peril that no mortgagee except under the strongest pressure should assume possession, and certainly never when he could get a receiver. For, by means of appointing a receiver, mortgagees are able to obtain the advantages of possession without its drawbacks.
38. Under the Law of Property Act, 1925, a simple mortgagee could apply for appointment of a Receiver. An equitable mortgagee in England had always the right to apply for the appointment of a Receiver as a matter of course. The law in India is different. While it is open to the Courts in suits by simple mortgagees, and also in suits by equitable mortgagees, to appoint a Receiver over the mortgage property, there is no such thing as a right on the part of the said mortgagees for the appointment of a Receiver in such cases. In India, in such cases, Receivers are not appointed - as a matter of course. Even when the income, rent and profits of the property have been expressly included in the simple mortgage as security for the mortgage debt, the mortgagee is not entitled, as of right, to have a Receiver appointed. The case will be the same when the right of personal relief against the mortgagor and his other property is still subsisting. The appointment of a Receiver is not a matter of right on the part of the mortgagee. The above circumstances would ordinarily work in favour of such appointment, in conjunction with the other facts of the case. Special circumstances have always to be proved before the Court could come to the conclusion that it is ' just and convenient' in that particular case to have a Receiver appointed over the mortgage properties. If, on the other hand, it is proved to the Court's satisfaction that it is just and convenient to appoint a Receiver, there is nothing in any provision of law to which our attention was drawn, nor any decision binding on us, that prevents the Court from making such an order. In the various cases decided by Courts in India referred to above, I do not find any reference made to personal relief against the mortgagor being available as a necessary condition for such appointment.
39. In Ponnu Chettiar v. Sambasiva Aiyar I.L.R.(1932) 56 Mad. 546 : 64 M.L.J. 682 (C.M.A. No. 445 of 1928) the learned Judges had not to decide, and in fact did not decide, that a Receiver could be appointed only when the personal remedy against the mortgagor was available, and that is specially noted by one of the learned Judges.
40. The only direct decision of this Court on this point in which the question is discussed is that reported in Venkata Rajah Gopala Surya Row Bahadur v. Basivi Reddi (1914) 29 M.L.J. 457. In that case, Justice Oldfield was of opinion that ' the Court has power to appoint a Receiver of mortgage property where a decree for sale is passed on a simple mortgage though the personal remedy is barred by limitation'. Justice Sadasiva Aiyar, on the other hand, would seem to have been of a different opinion, though at p. 463 that learned Judge says that 'he has come to the conclusion that this is not a fit case for the appointment of a Receiver'.
41. The decision in Rajah Satrucherla Gangaraju v. Rajah of Jeypore (1925) 23 L.W. 650 does not discuss the question of jurisdiction of the Court, but having regard to the facts of that case the learned Judges 'saw no reason to appoint a Receiver for property which is hot the subject-matter of the suit,' and 'which descended to the mortgagor after the mortgage suit was filed as reversioner to the estate of a minor'. The decision turned on the facts of the case only.
42. The circumstance that the mortgagee's right to proceed personally and against the other properties of the mortgagor is not available, is, in my opinion, no bar to the Court appointing a Receiver over the mortgage property (as distinct from the non mortgage property). Execution of such decrees could be stayed either by means of injunction issued in other suits or as a result of appeal. Though it is open to Courts in such cases to impose terms before granting injunction or staying execution, prima facie the jurisdiction of the Court over the subject-matter of the litigation before it should not, except for cogent reasons, be held to have been taken away from it. Whether the mortgagee could proceed against the other property of the mortgagor, or not, it is essential that the mortgagee should be protected in the matter of his proceeding against the very property mortgaged, which is the subject-matter of the suit.
43. I have already referred to the circumstance that the mortgagee, in the case of a simple mortgage in India, is not entitled to possession of the mortgage property. It follows that the mortgagor could deal with the right to possession of such property even after creating a simple mortgage over the said property. Till a suit is instituted, it would be open, ordinarily, to the person who has acquired right to possession of the property to appropriate the income of the mortgage property for his sole benefit. That proposition is not disputed. But when a suit is instituted by a simple mortgagee for the sale of the mortgage property with a view to realise the mortgage debt, then the argument relating to possession loses force. It cannot be denied that in a proper case it is open to the Court in execution of a mortgage decree to direct, that instead of the mortgage property being sold at once, a Receiver should be appointed to collect the rents and profits of the mortgage property, so that, if the decree amount could be paid within a reasonable time, the sale of the mortgage property might be avoided. The argument urged on behalf of the 3rd defendant in the present case would, if logically pressed, deprive the Court of jurisdiction to do so. I would therefore hesitate before accepting the 3rd defendant's contention, which would lead to such a result. Again, his contention, if logically applied, would deprive the Court of jurisdiction to appoint a Receiver over the mortgage property by removing a person in the position of the 3rd defendant (a subsequent purchaser of the equity of redemption) from possession of the same, because, even if personal relief against the mortgagor be available, it would be available only as against properties and rights that vested in the mortgagor on the date on which the Receiver is appointed, and in a case where the mortgagor had already parted with (for value) his right to possession of the property, in favour of a third person (like the 3rd defendant in this suit), the Court could not deal with the right to possession of the mortgage property, which ex hypothesi had left the mortgagor and passed to a third person in the position of the 3rd defendant before us. The 3rd defendant's argument based on the non-existence of right to personal relief against the mortgagor would seem logically to lead to the conclusion that even when right to personal relief subsists, the Court would have no jurisdiction to appoint a Receiver, since right to possession had passed to the purchaser of the equity of redemption, and did not remain in the mortgagor on the date of the suit. The same argument of the 3rd defendant would also lead to the conclusion that, in such a case, a Court could not appoint a Receiver over the mortgage property, even by its decree in the suit. That argument in my opinion ignores the distinction between the mortgage property and 'non-mortgage property'; the jurisdiction to appoint a Receiver would always subsist in the case of mortgage property - the subject-matter of suit, whereas it would not exist with reference to non-mortgage property in a case where the personal remedy is not available. But when a similar argument was advanced before the very same learned Judge, Justice Krishnan Pandalai, in C.M.A. No. 493 of 1931, decided on 1st November, 1932, that learned Judge (as I understand the judgment) overruled the contention and, in my opinion, rightly. The learned Judge observed that the act of the mortgagor in selling the equity of redemption could not deprive the Court of its jurisdiction to appoint a Receiver and that by transferring possession to a stranger a mortgagee could not be baffled. This last argument, in my view, really takes away the bottom from the respondent's contention.
44. It has been held that a Court has jurisdiction, in a suit filed by an equitable mortgagee in India, to recover money due on the equitable mortgage, to appoint a Receiver over the mortgage property. An equitable mortgagee in India has no right to possession of the mortgage property. If the Court has jurisdiction in the case of an equitable mortgage to appoint a Receiver over the mortgage property, it should surely have jurisdiction to appoint such a Receiver in the suit of a simple mortgagee in India. The Court has complete jurisdiction over the subject-matter of the suit, and if the Court could sell the mortgage property, it should also have jurisdiction to appoint a Receiver over the same. In the circumstances, I think, it is for the 3rd defendant to satisfy us that the Court has no jurisdiction to appoint a Receiver in such a case. He has not only satisfied me that it is so; but, for reasons already given, it seems to me that the Court has got jurisdiction in the matter.
45. With great respect, I am not able to agree with the observations of the learned Chief Justice of the Patna High Court in Nrisingha Char an v. Rajniti : AIR1932Pat360 regarding the rights of an equitable mortgagee in India to demand possession of the mortgage property. In my opinion, there is no difference in this respect between a simple mortgage and an equitable mortgage in India, and neither of the said mortgages carries with it any right to demand possession in India. The other learned Judge in the Patna case did not discuss the question of law, but held on evidence that no case for appointment of a Receiver had been made out in that case. In Ghose on Mortgages, 3rd Edition, page 597 (note 1) and 5th Edition, page 632 (a), the learned author states as follows:
It should be noticed that the Court may appoint a receiver at the instance of the mortgagee where the action is for foreclosure or sale, if there is reason to suspect that the security is insufficient or if the interest is in arrear.
46. In Jaikissondas Gangadas v. Zenabai I.L.R.(1890) 14 Bom. 431 a case decided under the Code of Civil Procedure of 1882, Sir Charles Sargent, Kt., C.J., and Justice Telang held that 'the High Court possesses the same powers with regard to the appointment of a Receiver as are possessed and exercised by the Courts in England under the Judicature Act'. The learned Judges observed that when it was ' just and convenient' to do so, a Receiver could be appointed by the Court. That was not the test laid down in Section 503 of the Code of 1882, but the learned Judges applied that test. Under the present Code of Civil Procedure, Order 40, Rule 1, the test of 'just and convenient' has been expressly enacted for guidance in appointing Receivers in suits. Therefore, the ruling in Jaikissondas Gangadas v. Zenabai I.L.R.(1890) 14 Bom. 431 is rather useful for decisions of cases that arise under the present Code of Civil Procedure. At page 435 in Jaikissondas Gangadas v. Zenabai I.L.R.(1890) 14 Bom. 431 the learned Judges stated as follows:
Now in the present case, we think, it is 'just and convenient' that a receiver should be appointed. There are exceptional circumstances here. The mortgage-debt is for a very large amount. The value of the property is said to be insufficient to cover the debt, and there is a large sum owing for arrears of interest. It is, therefore, a case in which a receiver is desirable, and we think he ought to have been appointed by the decree made by the Court below.
47. For these reasons, I have come to the conclusion that the Court has jurisdiction, in a proper case, to appoint a Receiver in respect of mortgage properties in a suit filed by a simple mortgagee to realise his debt from the mortgage properties, and that appointment of a Receiver is only a mode of realising such security in the case of a simple mortgage.
48. As the learned Judge has agreed with the Subordinate Judge on the merits that, if the Court has got jurisdiction in this matter, the order appointing Receiver was justified by the circumstances, it follows that the Letters Patent Appeal must be allowed and the decision of the Subordinate Judge restored with all costs in the High Court.
49. In the determination of the question before us not much assistance, I think, is to be got from English rules and precedents. The reasons for the rule for appointing a Receiver for the benefit of a legal mortgagee or of an equitable mortgagee in England (see Kerr on Receivers, pages 32, 35 and Coote on Mortgages, Vol. II, page 823) do not stand good for the appointment of a Receiver in favour of an Indian simple mortgagee; but that argument does not exclude the possibility of a Receiver being appointed on behalf of a simple mortgagee. The power in India to appoint a Receiver by way of execution is conferred on the Courts by the Civil Procedure Code, and it is a mistake, in my opinion, to treat it as if it must be dependent upon English equitable rules.
50. The remedy of the simple mortgagee is a judicial sale of the mortgaged property: Sri Raja Papamma Rao v. Sri Vira Pratapa H.V. Ramachandra Razu . That is his legal remedy. In the absence of any clear rule to the contrary, why is he not to be entitled to crave as auxiliary to his legal remedy the equitable remedy provided by Order 40, Rule 1 of the appointment of a Receiver? Order 40, Rule 1 is available unless we hold with the view taken in Makhan Lal v. Mushtaq Ali (1927) 100 I.C. 735 that Order 34 shuts out any recourse to Order 40, Rule 1. But that ruling finds no support in any of the decisions of this High Court or in the Bengal and Bombay High Courts relating to the appointment of a Receiver in mortgage suits, and I am not prepared to follow it. Order 40, Rule 1 is expressed in general terms. It empowers the Court to appoint a Receiver of any property whenever it appears to the Court to be just and convenient. If the question had to be decided simply on the language of Order 40, Rule 1, I would say that if the Court was satisfied that justice and convenience required the appointment of a Receiver for the benefit of a simple mortgagee the rule was sufficiently wide to sanction the appointment. There is a considerable weight of authority on the side of this interpretation. The cases are summarised by Kumaraswami Sastri, J., in Ethirajulu Chetti v. Rajagopalachariyar I.L.R.(1928) Mad. 979 : 56 M.L.J. 115 and the conclusion he arrived at was that in the case of a simple mortgage, if the circumstances warranted it, the Court had power to appoint a Receiver. With that conclusion I agree.
Krishnan Pandalai, J.
51. From whom this appeal comes, appears to have been guided in his decision very largely by the observations of Sadasiva Aiyar, J., in Venkata Rajah Gopala Surya Row Bahadur v. Basivi Reddi (1914) 29 M.L.J. 115. With due deference, I think that what Sadasiva Aiyar, J., said in that case was in favour of the Court's power to appoint a Receiver, though in the particular circumstances he thought that a Receiver should not be appointed. He began by expressing the opinion that the existence of a right in the plaintiff to receive rents and profits was not an indispensable pre-requisite for the exercise of the Court's power to appoint a Receiver. That amounted to an opinion that the equitable remedy in favour of a simple mortgagee had no relation to a right to enter into possession of the mortgaged property, a right which a simple mortgagee has not got. He then proceeded to reject the suggestion that the words 'any property' in Order 40, Rule 1 meant exclusively the property the subject of the suit, i.e., the property subject to the mortgage. And he concluded by holding in the special circumstances of the case (inter alia, the personal remedy against the mortgagor was apparently barred) that 'it was not a fit case for the appointment of a Receiver.' The power to appoint is given to the Court by Order 40, Rule 1 and is independent of anything done by the mortgagee. It may be that the circumstance of the mortgagee having given up his personal remedy against the mortgagor, as he is alleged to have done in the case before us, or of his having allowed it to become barred by lapse of time, might weigh with the Court in considering whether the equitable remedy should be given to the mortgagee. Those are matters which might influence the Court's discretion; but I fail to see how they could possibly control the Court's power.
52. It is admitted that the present case is a proper one for a Receiver to be appointed, and I think that the Court had power to make the appointment.