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P.P.P. Chidambara Nadar Vs. K.P.C. Mahalinga Nadar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1936Mad321
AppellantP.P.P. Chidambara Nadar
RespondentK.P.C. Mahalinga Nadar and ors.
Cases ReferredShrinivas v. M.C. Vaz
Excerpt:
- - the failure to obtain the previous sanction, nothing further being shown, is not a sufficient reason for disallowing the item. , points out, the court's sanction may be given even after the thing is done, provided the court is satisfied that it has been well and properly done. the objection 'that the enquiry under rule 4 is but a summary enquiry, is without force as by that expression is meant no more than an enquiry which secures the usual degree of fairness and efficiency and which gets rid of a good deal of formality and delay......the item in toto on the ground that before advancing the money, the receiver has not obtained the previous sanction of the court. the law imposes a certain penalty when the receiver chooses to advance his own money without first obtaining the court's permission, but it does not follow that the penalty extends to the disallowance of the interest. jessel, m. r., points out in ex parte izard, in re bushell (1883) 23 ch d 75, that if a receiver chooses to advance money of his own without the previous authority of the court, he can only look to the estate for indemnity. the practice in the chancery division is for a receiver, before advancing the money, to apply to the court for its authority to do so, and when the court gives him authority it generally allows him interest at 5 per cent and.....
Judgment:
ORDER

Venkatasubba Rao, Offg. C.J.

1. The questions raised relate to the passing of the receiver's accounts before an order is made for his discharge. The accounts to be passed are for the period from 11th February 1923 to 20th July 1931. The first objection relates to the sum of Rs. 6,700 odd, the interest claimed by the receiver on the advances made by himself. The lower Court has disallowed the item in toto on the ground that before advancing the money, the receiver has not obtained the previous sanction of the Court. The law imposes a certain penalty when the receiver chooses to advance his own money without first obtaining the Court's permission, but it does not follow that the penalty extends to the disallowance of the interest. Jessel, M. R., points out in Ex parte Izard, In re Bushell (1883) 23 Ch D 75, that if a receiver chooses to advance money of his own without the previous authority of the Court, he can only look to the estate for indemnity. The practice in the Chancery Division is for a receiver, before advancing the money, to apply to the Court for its authority to do so, and when the Court gives him authority it generally allows him interest at 5 per cent and gives him a charge on the assets for that sum and the interest. He is still entitled to this interest even where he does not obtain the previous sanction, but in such a case he can only look to the estate for indemnity for the payment of the principal and interest and. he will not be entitled to a personal order for payment. Beyond this he incurs no further penalty. The question arose there in bankruptcy and Jessel, M.R. points out that the Court of Bankruptcy can do what the Chancery Division can and goes on to say:

The only order which could be made would be that the trustee should pay him out of the assets, if he had available assets in his hands. In the present case there is no evidence that when the order appealed from was made the trustees had any assets in his hands; the only evidence is that he had previously had assets in his hands and that he had paid then away: see also Kerr on Receivers, 1930 Edn., p. 322: where the law is stated as declared by Jessel, M.R.

2. There is no question in the present case, as the discussion by the lower Court shows, that the moneys were advanced for proper purposes and that being so, I must set aside the lower Court's order and hold that the receiver is entitled to interest.

3. The claim to 12 per cent compound interest is no doubt extravagant, but I think that 9 per cent simple interest is, in the circumstances a proper rate to allow. The next item is that of Rs. 5,500-odd claimed by the receiver as being the aggregate of the salaries disbursed by him. The lower Court's view in this respect is also wrong. The item has been disallowed on two grounds: first that the previous sanction of the Court had not been obtained, and secondly that the amount claimed is ridiculously excessive in view of the fact that the realizations during the period did not exceed Rs. 4,400 odd. Neither of these two grounds is sound in law. The failure to obtain the previous sanction, nothing further being shown, is not a sufficient reason for disallowing the item. In Ex parte Gordon, In re Gomersall (1875) 20 Eq 291, as Bacon, C.J., points out, the Court's sanction may be given even after the thing is done, provided the Court is satisfied that it has been well and properly done. If the receiver shows the expense, incurred upon his own responsibility, to have been necessary and such as would have been authorized by the Court tad application been previously made, he will be reimbursed for such outlay as if previous authority had been given. (High on ' Receivers ', (1910), 4th Edn., p. 945.)

4. Passing on to the second ground, the questions that arise for decision are : (a) Did the receiver actually incur the expenditure or any part of it? and (b) in view of the nature and extent of the work, was he justified in incurring any expenditure at all If he was, what would be the proper amount to allow under this head? Turning to item 3, the rent claimed by the receiver, the lower Court has properly disallowed it. The receiver was a party to the suit and does not profess to have actually paid the rent but claims it on the ground that a portion of his house has been used for the purposes of the business. Having offered to discharge the duties without remuneration, he is hardly justified in claiming this amount. I have now dealt with the receiver's complaint against the lower Court's order. Turning now to the other Civil Revision Petition (368 of 1933), the matter stands thus: In regard to the several charges made against the receiver, such as, on the ground of wilful default, the lower Court has referred the parties to a regular suit. Order 40, Rule 4, Civil P.C., has since been amended, but even under the amended rule, the Court is ordinarily bound to deal with all matters relating to the receiver in the proceeding itself. In Kamatchi Ammal v. Sundaram Ayyar (1903) 26 Mad 492, it was held that redress against the receiver should generally be sought in the very proceeding in which he was appointed. As pointed out in Shrinivas v. M.C. Vaz 1921 45 Bom 99, the proper occasion for making allegations against the receiver is, when his accounts are passed and the Court ought to protect its officers and not allow the parties to pester the receiver with actions. The objection 'that the enquiry under Rule 4 is but a summary enquiry, is without force as by that expression is meant no more than

an enquiry which secures the usual degree of fairness and efficiency and which gets rid of a good deal of formality and delay. [Heaton, J., in Shrinivas v. M.C. Vaz 1921 45 Bom 99 .]

5. Although under the amended rule, the Court may at its option refer the parties to a separate proceeding, it is bound, when it makes such an order, to record its reasons, which shows that ordinarily the enquiry should be held in the proceeding itself. This litigation dates from a reference to arbitration made in 1919 and the proceedings have dragged out over a period of over 15 years, and it i& extremely desirable that they should not be allowed to be further protracted. Various charges have been made against the Receiver and several issues have been framed. My direction is that all such questions as bear on the Receiver's discharge and relate to matters between him and the estate should be decided in this very proceeding. It is unnecessary for me to define with precision what those questions are, but as one particular matter has been brought to my notice, I may dispose of it at once. An order is sought against the Receiver for payments of Rs. 4,000 alleged to have been borrowed by him for the business from certain persons (see para. 13(c) of the counter affidavit of Rama Nadar dated 30th October 1931 filed in the lower-Court). Whether those persons are parties to the suit or strangers (that makes-no difference), the matter cannot be gone into in this proceeding. The sums borrowed by the Receiver and brought into the business have been shown (I gather) as advances made by him and he treats himself to that extent as a creditor of the estate having incurred personal liability in respect of those borrowings. That being so, the remedy of the lenders of the amounts, against the Receiver, in such cases is by way of independent proceedings and the questions cannot be gone into in this enquiry. I, therefore, direct the lower Court to deal with all such matters as are relevant to this enquiry, in the light of my remarks above made and to return its findings on those matters within two months from this date. Time for filing objections to the finding is 10 days. The question of costs as regards both the Civil Revision Petitions is reserved.


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