G. Ramanujam, J.
1. The civil miscellaneous appeal is directed against the order of the First Additional Subordinate Judge, Pondicherry in I.A. No. 1554 of 1979 in O.S. No. 287 of 1978 appointing an Advocate Receiver to take charge of a business carried on in the name and style of S.S. Agencies, pending the suit O.S. No. 287 of 1978 on his file.
2. The circumstances under which the impugned order had been passed may be briefly stated. The respondents herein filed the said suit O.S. No. 287 of 1978 on the file of the Sub-Court, Pondicherry, for a declaration that the business which is carried on by defendants 1 and 2 in the name of S. S. Agencies belongs to the partnership of M/s. Hassan Kuthus Maricar consisting of the plaintiffs and the first defendant and for other reliefs which included the relief of 'committing the business of S.S. Agencies to the custody of an Advocate-Receiver'. The plaintiffs and the 1st defendant in the suit are admittedly brothers and they are said to have carried on a prosperous family partnership business under the name and style of M/s. Hassan Kuthus Maricar. In or about 1977, the said family partnership is stated to have been converted into a private limited by name M/s. Hassan Khuthus Maricar Private Limited which fact is however disputed by the defendants. The Plaintiffs' case, as set out in their plaint is as follows:
3. By mutual agreement between the partners of the family partnership an agency was taken from Spencer and Company for selling Spencer's soft drinks in the territory of Pondicherry and the said agency business was started in the name and style of S.S. Agencies with the funds of the said family partnership. The said business was entrusted in the hands of the first defendant and the agency was taken in the name of the 2nd defendant who is none else than the first defendant's wife. The agency business in the name and style of S.S. Agencies is being carried on in premises No. 2, Labour-denais Street, Pondicherry which has been taken on lease by the family partnership of M/s. Hassan Khuthus Maricar and all the establishment expenses of the said business are being met by the said firm. Thus, the plaint proceeds on the basis that though S.S. Agencies business stands and is being run in the name of the second defendant, the said business is actually one of the businesses of the family partnership and, therefore, the said business should be declared to be the business of the family partnership. The plaintiffs have also alleged in the plaint that taking advantage of the fact that the Agency stands in the name of the 2nd defendant both the 1st and 2nd defendants are misappropriating the income from the business without bringing it to the account of the family partnership and it is on the basis of the said allegation the plaintiffs have prayed for the appointment of a Receiver for the said business.
4. The first defendant who is stated to be the power-agent of his wife, the 2nd defendant has filed a written statement wherein the business of S.S. Agencies has been claimed to be the exclusive business of the second defendant. It is averred therein that the business of S.S. Agencies has been started with the exclusive funds of the 2nd defendant, that the business is carried on in the residence of the 1st and 2nd defendant at No. 2 Labour-denais Street, Pondicherry that the said premises was taken on lease originally in 1975 by the 1st defendant for residence though at a certain point of time the partnership of M/s. Hassan Khuthus Maricar had undertaken to pay the rents for the said premises on behalf of the first defendant who is a partner of that firm. The payment of rent and the telephone charges for the telephone installed in the said premises cannot at all be connected with the business of S.S. Agencies. S.S. Agencies was always the separate exclusive business of the second defendant and neither the plaintiffs nor the firm of M/s. Hassan Khuthus Maricar had any interest therein. Thus the defendants specifically denied the claim put forward by the plaintiffs as to the ownership of the business S.S. Agencies, but put forward their claim of an exclusive title to the said business.
5. It is not disputed either in the plaint or before us that the business S.S. Agencies is being carried on as at present by defendants 1 and 2 As a matter of fact it is only on that basis the plaintiffs have prayed in the plaint for the appointment of an Advocate-Receiver to take charge of the business of S. S. Agencies from defendants 1 and 2. Along with the plaint, an application was filed on 24th October, 1978 in I.A. No. 2383 of 1978 by the plaintiffs for the appointment of a Receiver pending suit. Somehow, no orders seem to have been passed in the said application. However, another application in I.A. No. 1554 of 1979 was filed by them for the appointment of a Receiver. The Court below has appointed an Advocate-Receiver for the business of S.S. Agencies which was being carried on admittedly by defendants 1 and 2 on the date of filing the suit mainly on the ground that certain conditions imposed by the Court in some interlocutory orders had not been strictly complied with by the defendants, that the allegation made by the plaintiffs that a scrutiny of the accounts produced reveals malversation of funds appears to be justified and that, therefore, an order appointing a Receiver is called for.
6. In this appeal before us, the learned Counsel for the appellants (defendants) contends that the plaintiffs have not made out any prima facie case for the appointment of a Receiver, and that as the plaintiffs' claim of ownership of the business has been stoutly denied by the defendants the plaintiffs have to establish their claim of title before they seek the appointment of a Receiver. According to him, there is no justification for the Court below to invoke the powers under Order 40, Rule 1 of the Code of Civil Procedure, on the facts of this case. Learned Counsel submit led that even if it is taken that a prima facie title to the suit business had been made put by the plaintiffs, the Court has no jurisdiction or justification for dispossessing the defendants who are actually carrying on the business and putting that business into the hands of a third party Receiver unless a strong case is made out.
7. As against these submissions of the learned Counsel for the appellants, the learned Counsel for the respondents would contend that once a suit has been filed claiming title to the business it is in the interest of all the parties to appoint a third party Receiver to look after the business especially when the plaintiffs apprehend that much damage may be caused to the business and the funds of the business may be secreted by the defendants.
8. There cannot be any dispute that the Court can appoint a Receiver in an interlocutory application to protect the properties which are the subject-matter of the suit if there is any apprehension that the properties will be damaged, wasted or misappropriated. But a Receiver can be appointed only in case where the plaintiffs make out a prima facie case as regards title to the property. In a case where the plaintiff's title to the property is in dispute, there cannot be any appointment of a Receiver in respect of that property the title to which the plaintiff has to establish at the trial. In this case, as already stated, though the plaintiffs claimed title to the business of S.S. Agencies, the defendants have categorically disputed that title and claimed exclusive title in the 2nd defendant. That the business S.S. Agencies stands in the name of the 2nd defendant has been admitted even by the plaintiffs. As a matter of fact, the plaint proceeds on the basis that the business S.S. Agencies stands in the name of the 2nd defendant and it is only on that basis they have asked for a declaration that the business which stands in the name of the 2nd defendant should be declared to be the business of the firm M/s. Hassan Khuthus Maricar. Thus prima facie the title to the business as on this date vests with the 2nd defendant. Till that title is displaced and the plaintiffs are declared to be the owners of the business, the Court will not be justified in appointing a Receiver for the business which is being carried on by the 2nd defendant admittedly in her own name.
9. Admittedly, a sum of Rs. 20,000 which has been initially advanced for the agency business has proceeded from the 2nd defendant. The plaintiffs however, would say that the 2nd defendant was due to the firm in a sum of Rs. 20,000 and that the said sum was utilised by the 2nd defendant for the purpose of S.S. Agencies at their instance. But no documentary evidence had been adduced with regard to the assertion that the 2nd defendant utilised the sum of Rs. 20,000 for the S.S. Agencies at the request of the firm M/s. Hassan Khuthus Maricar. This fact is denied by the 1st defendant as power-agent of the 2nd defendant and his case is that the sum of Rs. 20,000 was paid by the 2nd defendant for her own benefit in connection with the starting of the S.S. Agencies. In the light of this denial by the 2nd defendant as to the utilisation of the sum of Rs. 20,000, for the benefit of the firm, some prima facie material should have been placed before the Court by the plaintiffs to indicate that the 2nd defendant who is stated to be a debtor to the firm M/s. Hassan Khuthus Maricar repaid that sum by utilising the amount of Rs. 20,000 for the S.S. Agencies for the benefit of the firm. If that was a fact then the partnership accounts would clearly show the receipt of Rs, 20,000 from the 2nd defendant and the utilisation of the same for the purpose of S.S. Agencies business by the firm. The plaint which sets out elaborate details as to the starting of S.S. Agencies does not indicate the motive as to why the franchise for S.S. Agencies business was taken in the name of the second defendant. Wherever a party puts forward a case of benami, it is for that party to show as to what is the motive for entering into a benami transaction. In this case, admittedly the partnership is being carried on by all the brothers and that partnership is carrying on various lucrative businesses. There is no reason pointed out as to why this firm should carry on the suit business alone in the name of a third party, the second defendant. The materials which have been placed before the Court by the plaintiffs as showing the firm's prima facie title to the S.S. Agencies are (i) the payment of rent for premises No. 2, Labourdenais Street, Pondicherry; and (ii) the payment of telephone charges for the telephone installed in that premises. The defendants have given sufficient explanation as to why for some period the firm has paid the rent for the premises and also the telephone charges. It is their case that the 1st defendant is a partner of the firm M/s. Hassan Khuthus Maricar and that in pursuance of an agreement between the partners to pay the rent for the premises occupied by the first defendant a partner, the rents have been paid by the firm for the said premises, and that by the mere payment of rent for the premises, no connection can be established between the firm and the business. Having regard to the fact that the premises was taken on lease originally by the 1st defendant for his residence and the firm has paid the rents for the said premises even before the business of S.S. Agencies was started, it is not possible to connect the payment of rent with the business at all. Bven if the business of S.S. Agencies had not been started rents would have been paid for the premises used as a residence for one of the partners. Admittedly the second defendant is residing with her husband, the 1st defendant. Therefore, the residence of the first defendant might have been used for carrying on the business of S.S. Agencies. From that circumstance alone, it is not possible to assume that S.S. Agencies belonged to the firm which paid the rent for the premises. The firm might have paid the rent for the premises on behalf of the partner. Merely by the production of the rent receipts as also the receipts for payment of telephone charges the plaintiffs cannot be taken to have established a prima facie case of owner-ship of the business S.S. Agencies.
10. The learned Counsel for the appellants-plaintiffs has referred to certain conduct of defendants 1 and 2 when the matter was pending before the Court below in not strictly complying with certain conditions imposed by the lower Court. He has also referred to certain correspondence that passed between the Receiver appointed in the case and the defendants as also the bank authorities, with reference to shortage in the stocks. Once we find that there is no prima facie case for the plaintiffs as regards ownership of the business for which they seek for the appointment of a Receiver, the above factors by themselves will not enable the plaintiffs to get an order of appointment of a Receiver for the business. If really the defendants have not carried out certain directions issued by the Court in proceedings for the issue of injunction etc., it is for the Court to take other suitable proceedings. Merely on the ground that there is no proper compliance with the order of Court, the Court cannot appoint a Receiver for an asset, the title to which the plaintiffs have to establish at the trial and especially when the plaintiffs' claim of title is disputed, and exclusive title is claimed by the defendants. The correspondence between the Receiver and the defendants of the one hand and the Receiver and the bank authorities on the other cannot be taken advantage of by the plaintiffs as they are all events subsequent to the appointment of a Receiver. To find out the correctness or otherwise of the order of the lower Court appointing a Receiver, subsequent events cannot be taken note of. We cannot, therefore attach any credence either to the alleged conduct of the defendants in the course of the interlocutory proceedings for the issue of an injunction or subsequent to the order appointing a Receiver.
11. It is well established that in a case where the plaintiff's title to an asset is disputed there cannot be an appointment of a Receiver in relation to that asset pending the suit in which the title to that asset has to be established. Kerr on Receivers (Fifteenth Edition) at page 79 observes:
As a general rule, where one person was in possession of rents and profits of an estate claiming to be the holder by a legal title, and another person also claimed to hold by a legal title, the former could not be ousted in the Court of Chancery until the true ownership of the legal title had been finally determined at law.
It has also been pointed out by the same author that the Court would not as a rule appoint a Receiver at the instance of a person alleging a mere legal title against any party who is in actual possession of the real estate and disturb his possession. Even if the plaintiffs had established a prima facie title to the business still the plaintiff must allege and establish to the satisfaction of the Court that but for the appointment of a Receiver the business which is the subject-matter of the dispute will be either wasted, damaged or ruined or the funds of the business will be misappropriated. In this case except saying there is likelihood of the defendants acting adverse to the plaintiffs' interest no possible destrictive waste had been established.
12. One other matter is of considerable significance in this case. Even according to the plaintiffs, the business was started in December, 1977 and the business has been allowed to be carried on by the first defendant. In such circumstances, Courts have held that parties who have acquiesced. In the property being enjoyed by others against their own alleged right cannot except in special circumstances come to Court for the appointment of a Receiver.
13. In Greville v. Fleming (1845) 2 J& L 335 the Court held that it is not open to the Court normally to appoint a Receiver at the instance of the person whose right is disputed, where the effect of the order would be to establish the right, even if the Court is satisfied that the person against whom the demand is made is fencing off the claim.
14. It is true that the Court has got absolute discretion in the matter of appointment of receiver. Bat the discretion cannot be exercised in an arbitrary and in an unreasonable manner. It has to be exercised cautiously-judiciously and according to well, established legal principles. Applying the well established legal principles, the plaintiffs herein who seek to displace a title to the business vested in another person, cannot get an order appointing a Receiver for that business especially when their claim of title is hotly contested by the defendants who put forward an exclusive title to the business in themselves. In this case we are of the view that the plaintiffs have not made out a prima facie case for exercising the discretion in their favour. In this view, we allow the civil miscellaneous appeal and set aside the order of the lower Court appointing a Receiver. There will be no order as to costs.