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Sri Rajah Rao Venkatakumara Mahipathi Surya Rao Bahadur Garu, the Maharaja of Pittapuram Vs. Gokuldoss Goverdhanadoss and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1931Mad626; (1931)61MLJ111
AppellantSri Rajah Rao Venkatakumara Mahipathi Surya Rao Bahadur Garu, the Maharaja of Pittapuram
RespondentGokuldoss Goverdhanadoss and ors.
Cases ReferredRameshwar Singh v. Chuni Lal Saha I.L.R.
Excerpt:
- - in england it is well understood that an equitable mortgagee, though he is not entitled to take possession of the mortgaged properties, has the right to ask for the appointment of a receiver :in re crompton & co. in our opinion, this contention is clearly well founded. since the receiver in this case was appointed at the instance of the petitioner and since he was not able to realise his decree amount by the sale of the mortgaged properties, it must be held that he is clearly entitled to proceed against the income in the hands of the receiver as one of the steps for realisation of his security......in para. 643 it is stated that a mortgagee who procures a receiver to be appointed in a mortgage suit is entitled to the income from the mortgaged properties in the hands of the receiver in preference to the assignee. this statement of law is very relevant to the present proceedings, as objection to the payment of the money is here raised by the official assignee. the passage in which the statement of law is made runs thus:when, therefore, a mortgagee, upon proceedings for a foreclosure, obtains a receiver of the rents and profits, if the amount obtained upon a sale of the premises proves insufficient to pay the mortgage indebtedness, he is entitled to so much of the rents in the receiver's hands as will make up the deficiency. and this is so, even though the mortgagor's rights in the.....
Judgment:

Madhavan Nair, J.

1. These two applications relate to the same subject-matter, that is, a sum of Rs. 6,218-14-3 standing to the credit of C.S. No. 229 of 1924 and representing the income from the mortgaged properties involved in that suit other than Misquith Buildings and Cathedral Gardens. In the one, the receiver is asked to deposit the amount in Court and in the other, that is, Application No. 244 of 1931, a request is made that the same sum may be paid over to the plaintiff in the suit, the Maharaja of Pittapuram, who is the petitioner in both the applications. The Official Assignee of Madras and the plaintiff in C. S. No. 622 of 1923 oppose these applications.

2. The facts necessary for the disposal of these applications may be stated very briefly as follows : One Gokuldoss, manager of a joint Hindu family, trading under the style of Murlidoss Ramdoss & Co., effected on behalf of the firm an equitable mortgage by depositing title-deeds of ten items of properties with the petitioner, the Maharaja of Pittapuram, and borrowed from him a sum of Rs. 3,85,000 in the year 1922. For the recovery of the principal and interets due under this mortgage the Maharaja filed a suit C.S. No. 229 of 1924 on 27th March, 1924. In the meanwhile, the 3rd defendant in the suit, a minor, had already filed C.S. No. 622 of 1923 against the other members of the firm for partition of the joint family properties. For disposing of these applications it is not necessary to state any- thing about the contentions of the parties in these suits. The suits : were eventually decreed and appeals against the decrees are now pending in the Appellate Court. In C.S. No. 622 of 1923, the partition suit, Mr. E. R. Krishnan, an advocate of this Court, was appointed on 31st August, 1923, receiver of all the properties alleged to belong to the joint family of Messrs. Murlidoss Ramdoss & Co., including the properties mortgaged to the plaintiff in C.S. No. 229 of 1924. Subsequently the firm was adjudicated insolvents in 1924 and the Official Assignee was impleaded as its legal representative. The receiver appointed by the Court continued in possession of the properties. On 18th July, 1927, the petitioner (plaintiff in C.S. No. 229 of 1924) made an application for the appointment of an independent receiver for the properties mortgaged to him; but, it would appear, the learned Judge took the view that an independent receiver was unnecessary and that the plaintiff's interest could be safeguarded by directing the receiver in C.S. No. 622 of 1923 to keep a separate account of the income of the properties mortgaged to him and this was accordingly ordered on 25th July, 1928. The receiver was also directed that none of the income from these properties should be spent in giving the maintenance allowed to the plaintiff in C.S. No. 622 of 1923. The petitioner again filed on 23rd April, 1929, another application (Application No. 1524 of 1929) for the appointment of a receiver for the properties mortgaged to him. Both the suits were tried together by Venkatasubba Rao, J. On 2nd May, 1929, a mortgage decree was passed in favour of the petitioner (plaintiff in C.S. No. 229 of 1924) for Rs. 7,00,000 and odd and for the sale of the items of mortgaged properties except Cathedral Gardens and Misquith Buildings; and on the same date the learned Judge appointed Mr. E. R. Krishnan (the receiver in C.S. No. 622 of 1923) and Mr. P. Kameswara Rao, an advocate, as joint receivers of the mortgaged properties for the sale of which the petitioner had established his right in the suit. The sum now in the hands of the receiver is stated to be the income from those properties realised subsequent to the date of the decree. The. mortgaged properties except Cathedral Gardens were sold and were purchased by the petitioner himself. The affidavits stated that only a sum of three lakhs and odd were realised by the sale.

3. The petitioner now claims that the income realised from the mortgaged properties should in law be treated as additional security for the amount found due to him under the mortgage, inasmuch as the receiver was appointed at his instance in his mortgage suit and, as such, the income from the. said properties should be considered to be ear-marked for his own use, it now having been found that his title to those properties has been established by the decree. His argument is that the possession of a receiver in a mortgage suit is prima facie for the benefit of the party who obtained the appointment, and on this principle he argues that the receiver who was appointed at his instance holds the property for his benefit and is bound to make over to him the entire income for the satisfaction of his dues. The Official Assignee, on the other hand, contends that with regard to this income the petitioner has no preferential rights and that his rights to it are only the same as those of the ordinary creditors. The question for decision is, which view is right. If the petitioner's contention is to be upheld, he will be entitled to an order for the payment of the sum in question to him.

4. Admittedly, the rights of the petitioner, who is an equitable mortgagee, are the same as those of a simple mortgagee, that is, he is not entitled to the possession of the properties under his mortgage; he can realise his dues only by getting a decree for selling them. In England it is well understood that an equitable mortgagee, though he is not entitled to take possession of the mortgaged properties, has the right to ask for the appointment of a receiver : In re Crompton & Co., Ltd. Player v. Crompton & Co., Ltd. (1914) 1 Ch. 954 Warrington, J., observes at page 967:

I think the right to the appointment of a receiver is one of the ordinary rights which accrue to a mortgagee, and especially to an equitable mortgagee who has no means of taking possession and whose security has become realisable as one of the steps in such realisation.

5. See also Kerr on Receivers (7th Edition), page 37. For some time there was some doubt in this Court as to whether a simple mortgagee is entitled to ask for the appointment of a receiver in his mortgage suit. It was held in Ethirajulu Chetty v. Rajagopalachariyar I.L.R. (1928) 52 M. 979 : 56 M.L.J. 115 that the right to the appointment of a receiver, which an equitable mortgagee has, may be extended to a simple mortgagee also. The fact that he is not entitled to have possession of the properties which was, urged as an objection against his claim to the appointment of a receiver cannot be considered as of any importance having regard to the reasons for the appointment of a receiver. As pointed out in Khubsurai Koer v. Saroda Charan Guha (1911) 14 C.L.J. 526:

If the decree is for sale, and if it is established that the security is not sufficient to satisfy the judgment-debt, a receiver will be appointed almost as a matter of course, specially if there has been default in the payment of interest.

6. In Rameshwar Singh v. Chuni Lal Shaha I.L.R. (1919) 47 C. 418 Mookerjee and Panton, JJ., observed:

There is no foundation for the contention that a mortgagee who is not, entitled to possession of the mortgaged properties is not entitled to ask for the appointment of a receiver. Whether the mortgagee is or is 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.

7. If the object of appointing a receiver in a mortgage suit is to look after the interest of the mortgagee, though he is only a simple mortgagee, is he not entitled to claim that the profits of the mortgaged properties Should be applied for his benefit when his security has become realisable, as one of the steps for such realisation? This point was considered in Rameshwar Singh v. Chuni Lal Shaha I.L.R. (1919) 47 C. 418, which I have already referred to. In that case, a receiver was appointed in a mortgage suit instituted by a simple mortgagee. The second mortgagee of the same properties was a party to the suit. The first mortgagee obtained a decree for the amount claimed by him. Meanwhile, the second mortgagee, who had a mortgage of only half of the property, had instituted a suit to enforce his security without joining the first mortgagee as a party. He obtained a decree and in execution of it he purchased the equity of redemption in relation to his mortgage. On an application made by him, the income of the property purchased by him in the hands of the receiver was ordered, in spite of the opposition of the first mortgagee, to be handed over to him by the Subordinate Judge : of Dacca. This order was set aside in appeal. In the course of the judgment Mookerjee and Panton, JJ., observed as follows:

Our attention has been invited to the case of Penney v. Todd (1878) 26 W.R. (Eng.) 502 where it was ruled that the possession of a receiver in a mortgage suit was. pruna facie for the benefit of the party who had obtained the appointment. On this principle if has been argued that a receiver who was appointed at the instance of the first mortgagee holds the property for his benefit alone and is bound to make over to him the entire income for the satisfaction of his dues. In our opinion, this contention is clearly well founded.

8. This decision is a clear authority in support of the contention urged, by the learned Advocate-General on behalf of the petitioner. If, according to this decision, the receivers in CS. No. 229 of 1924 are to be considered as having been appointed for the benefit of the petitioner at whose instance they were appointed, then it must follow that the income in their hands from the mortgaged properties should be devoted to the satisfaction of his dues. I may here refer to paragraph 6 of the order of the learned Judge appointing the receivers which is somewhat significant. It states subject to certain expenses the receivers 'shall pay the net receipts into Court to the credit of this suit' (i.e., CS. No. 229 of 1924). In Khubswat Koer v. Saroda Charan Guha (1911) 14 C.L.J. 526 Mookerjee, J., observes thus:

If a receiver is appointed in a mortgage suit he is bound to apply the proceeds for the benefit of the mortgagee.

9. In High on Receivers (3rd Ed.), in para. 643 it is stated that a mortgagee who procures a receiver to be appointed in a mortgage suit is entitled to the income from the mortgaged properties in the hands of the receiver in preference to the Assignee. This statement of law is very relevant to the present proceedings, as objection to the payment of the money is here raised by the Official Assignee. The passage in which the statement of law is made runs thus:

When, therefore, a mortgagee, upon proceedings for a foreclosure, obtains a receiver of the rents and profits, if the amount obtained upon a sale of the premises proves insufficient to pay the mortgage indebtedness, he is entitled to so much of the rents in the receiver's hands as will make up the deficiency. And this is so, even though the mortgagor's rights in the premises have passed to his assignee in bankruptcy, and have been sold by him; since the mortgagee, who procures a receiver to be appointed for the protection of his lien, is entitled to the rents in preference to the assignee or purchaser at his sale.

10. These authorities would show that the learned Advocate-General's contention that the petitioner is entitled to the payment of the amount claimed should be accepted. Since the receiver in this case was appointed at the instance of the petitioner and since he was not able to realise his decree amount by the sale of the mortgaged properties, it must be held that he is clearly entitled to proceed against the income in the hands of the receiver as one of the steps for realisation of his security.

11. Mr. Duraiswami Aiyar frankly concedes that the decision in Rameshwar Singh v. Chuni Lal Saha I.L.R. (1919) 47 C 418 is against him, but he argues that the decision is wrong and the principle of the English decision, which grants the right to an equitable mortgagee to proceed against the income of the mortgaged properties in the hands of the receiver for realising his debt when the security is insufficient, should not be extended to the case of a simple mortgagee in India who does not possess the right of foreclosure which an equitable mortgagee has in England. I do not think this is a sound contention. If this is the correct principle to be applied, then it must also follow that a simple mortgagee is not entitled to the right of appointment of a receiver in a mortgage suit; but this I have already shown, is not the case. It is true that a simple mortgagee has no right of foreclosure; but in my opinion it has not been established that there is any connection between the right of foreclosure and the right of getting a receiver appointed and the right of appropriating the income in the hands of the receiver, in the case of an equitable mortgagee. As already pointed out, a receiver will be appointed if the demands of justice require that the mortgagor should be deprived of possession. In this connection it may be observed that the right of foreclosure possessed by an equitable mortgagee, so much emphasized by Mr. Duraiswami Aiyar in his argument, is a right enforceable only by means of an action for the recovery of land; he cannot take actual possession of the land mortgaged to him as he is not entitled to it [see Coote on Mortgages, (8th Ed.), Vol. II, p. 823] and, in this respect, he is exactly in the same position as a simple mortgagee. The right of an equitable mortgagee to get a receiver appointed in a, mortgage suit having been extended to a simple mortgagee, neither of them having any right to possession of the properties, I think his admitted right to proceed against the income of the mortgaged property in the hands of the receiver for realising his debt when the security is insufficient for that purpose may also be extended to the case of a simple mortgagee in India. In my opinion, the authorities cited by Mr. Duraiswami Aiyar, In re Potts. Ex parte Taylor (1893) 1 Q.B. 648, In re Pearce. Ex parte The Official Receiver, The Trustee (1919) 1 K.B. 354 and In re Gershon and Levy (1915) 2 K.B. 527 do not support the principle on which he has based his contention.

12. For the above reasons, I order the receiver to deposit the sum of Rs. 6,218-14-3 in his hands to the credit of C.S. No. 229 of 1924; and I also order that the same amount may be paid over to the petitioner in these applications. The petitioner is entitled to his costs (taxed costs) from the estate of the insolvents.


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