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K.G. Ethirajalu Chetty Vs. A.P. Rajagopalachari and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported inAIR1929Mad138; 115Ind.Cas.244a
AppellantK.G. Ethirajalu Chetty
RespondentA.P. Rajagopalachari and ors.
Cases ReferredChockalingam Pillai v. Pichappa Chettiar
Excerpt:
civil procedure code (act v of 1908), order xl, rule 1 - suit by simple mortgagee to enforce mortgage--power of court to appoint receiver. - .....amount due. they state that the plaintiff cannot have in law a receiver appointed as he is only a simple mortgagee and that this application is virtually one for getting possession which he is not entitled to under the mortgage.4. on the merits i am of opinion that this is a fit case for the appointment of a receiver. but the question, however, arises whether the court has power to appoint a receiver at the instance of a simple mortgagee or other person who is not entitled to possession of the properties.5. order xl, rule 1 of the civil procedure code enacts that; where it appears to the court to be just and convenient, the court may, by order:(a) appoint a receiver of any property, whether before or after decree;(b) remove any person from the possession or custody of the property;(c).....
Judgment:

Kumaraswami Sastriar, J.

1. This is an application for the appointment of Receiver by the plaintiff who has filed the suit on a registered deed of mortgage, dated the 15th of February, 1926, for Rs. 23,238-3-5 re payable with interest at 12 per cent, per annum alleged to have been created by the 1st defendant and his deceased brother for the recovery of Rs. 31,190-3-3 with costs and further interest.

2. The affidavit in support of the application states that the properties yield a rent of Rs. 145 a month while the monthly interest accruing due is Rs. 300, that the defendants arc not paying the interest which they are bound to pay under the deed of mortgage but are enjoying the rents of the properties themselves, that the value of the properties has considerably diminished and it is not possible to recover the amount by a sale of the properties, that a very large sum is due for interest alone and that it is necessary, that a Receiver should be appointed for the purpose of receiving the rents and paying them over to the plaintiff so that ho may not incur further loss.

3. The 4th and 5th defendants are the minor sons of the deceased executant of the mortgage, and they oppose the application. They deny that the mortgage is binding on them and that the value of the properties has diminished or that there is any fear of the plaintiff not being able to recover the amount due. They state that the plaintiff cannot have in law a Receiver appointed as he Is only a simple mortgagee and that this application is virtually one for getting possession which he is not entitled to under the mortgage.

4. On the merits I am of opinion that this is a fit case for the appointment of a Receiver. But the question, however, arises whether the Court has power to appoint a Receiver at the instance of a simple mortgagee or other person who is not entitled to possession of the properties.

5. Order XL, Rule 1 of the Civil Procedure Code enacts that; where it appears to the Court to be just and convenient, the Court may, by order:

(a) appoint a Receiver of any property, whether before or after decree;

(b) remove any person from the possession or custody of the property;

(c) commit the same to the possession, custody or management of the Receiver and

(d) confer upon the Receiver the powers mentioned therein.

6. Sub-rule 2 provides that nothing in this rule shall authorise the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove.

7. I may point out that under the previous Code of 1882, the Court had power to appoint a Receiver for the realisation, preservation or better custody or management of any property, moveable or immoveable, the subject of a suit, or under attachment. The proviso to the section says that nothing in the section authorises the Court to remove from the possession or custody of property under attachment any person whom the parties to the suit, or some or one of them, have or has not a present right so to remove.

8. There can be little doubt that there is a material variation between the old and the new Code.

9. The argument for the defendants is that a simple mortgagee has only the right to bring the property to sale, and that during the continuance of the mortgage he has no right to possession, and he cannot indirectly by asking for a Receiver get possession. It is also argued that the plaintiff who has no present right to possession cannot ask that the defendants who are entitled to possession should be removed.

10. The authorities on this question are conflicting.

11. In Chockalingam Pillai v. Pichappa Chettiar : AIR1926Mad155 it was held by Sir Murray Coutts Trotter, C.J., and Wallace, J., that the Court cannot appoint a Receiver in a suit for the specific performance of an agreement to sell certain properties and to give a simple mortgage of certain other properties. The learned Judges observe: 'Mr. T.R. Ramachandra Iyer for the appellant contends that at any rate so far as the B schedule properties are concerned, it is not open to the lower Court to appoint a Receiver, the point being that the lower Court cannot by way of Receivership do what it would not be entitled to do even by way of decree. At the highest, the plaintiff is entitled, if he succeeds only to a simple mortgage on these properties, and having obtained this simple mortgage he could not immediately sue for possession. He is not entitled on the simple mortgage to possession. The most he could do is to enforce a sale on foot of the mortgage. We think that this argument is sound and that the lower Court was not justified in appointing a Receiver, so far as the B schedule properties are concerned.'

12. In Gobind Ram v. Jwala Pershad 43 Ind. Cas. 533 it was held by Sir Henry Richards, C.J., and Banerjee, J., that in the case of a simple mortgage, the mortgagor is entitled to remain in possession till the property is sold and the fact that the security is not sufficient and the property is deteriorating is no ground for the appointment of a Receiver.

13. A contrary view has been taken in several cases.

14. In Arunachalam Chettiar v. Manicka Varahar Desikar 3 Ind. Cas. 437 : 6 M.L.T. 238 it was held that a Receiver can be appointed after the decree on a mortgage where the decree-holder has been restrained by injunction from selling the mortgaged property and the security was insufficient for the realisation of the decree amount by sale. Reference was made to Ghanashyam Misser v. Gobinda Moni Dasi 7 C.W.N. 452.

15. In Paras Ram v. Puran Mal Ditta Mal 85 Ind. Cas. 737 : 1 Lah. Cas. 21 : A.I.R. 1925 Lah. 590 it wag held that there is nothing in Order XL. Rule 1 of the Civil Procedure Code which excludes mortgage suits from its operation and a Receiver can be appointed in a mortgage suit, that the Code gives the widest power to the Court to appoint a Receiver when id appears to the Court to be just and convenient and that the right to recover the rents and profits is not necessary to enable the plaintiff to obtain a Receiver. It was also held that a Receiver can be appointed if the security was insufficient for the realisation of the decree amount by the sale of the mortgaged property.

16. In Khubsarat Koer v. Sarada Charan Guha 12 Ind. Cas. 165 : 16 C.W.N. 126 Mukerjee and Carnduff, JJ., in dealing with the contention that the appointment of a Receiver in a mortgage suit is premature because the mortgagee is not under the mortgage-decree entitled to appropriate the profits of the properties given as security observe: 'In so far as the second contention is concerned, it has been urged that the object of the appointment of a Receiver in a mortgage suit is to secure the application of the profits of the mortgaged properties for the benefit of the mortgagee 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.' The learned Judges refer to Weatherall v. Eastern Mortgage Agency Co. 9 Ind. Cas. 985: 13 CRI.L.J. 495, Hopkins v. Worcester and Birmingham Conal Co. (1868) 6 Eq. 437 : 37 L.J. Ch. 729, Herbert v. Greene (1854) 3 Ir. Ch. Rep. 270 and Hacket v. Snow 10 Ir. Eq. 220.

17. In Manindra Chandra Ray v. Suniti Bala Debi : AIR1926Cal1006 it was held that the Court can appoint a Receiver at the instance of a mortgagee where the action is either for foreclosure, or sale if the security is insufficient or if the interest is in arrears.

18. In Ram Kumar Lal v. Chartered Bank of India, Australia and China 87 Ind. Cas. 375 : 41 CRI.L.J. 203 : A.I.R. 1025 Cal. 664 it was held that in a suit on a mortgage a Receiver could be appointed.

19. In Gobind Rani Dosi v. Brinda Rani Dosi 34 Ind. Cas. 405 : 23 CRI.L.J. 440 it was held that where a mortgagee applies for the appointment of a Receiver the proper question for consideration is what steps should be taken to protect the mortgagee.

20. In Rameswar Singh v. Chuni Lal Shaha 56 Ind. Cas. 839 : 47 C. 418 : 31 CRI.L.J.385 the learned Judges Mookerjee and Panton, JJ., observe: '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. The principle applicable to cases of this character was lucidly stated in the case of Herbert v. Greene (1854) 3 Ir. Ch. Rep. 270.'

21. In Jaikissondas Gangadas v. Zenabai 14 B. 431 it was held that the Court has power to appoint a Receiver in the case of a suit by a mortgagee for foreclosure or sale.

22. In Venkata Rajagopala Surya Row v. Basavi Reddy 26 Ind. Cas. 986 : 29 M.L.J. 457 : 1 L.W.785; (1814) M.W.N. 771 : 16 M.L.T. 407 Oldfield, J., was of opinion that the Court has power to appoint a Receiver of the mortgaged properties where a decree has been passed for sale on a simple mortgage even though the personal remedy is barred by limitation. The learned Judge refers to and distinguishes some of the cases contra. Sadasiva Iyer, J., in dealing with the contention of the appellant that unless the mortgagee was entitled to immediate possession of the corpus of the mortgaged property or at least to the immediate receipt of the rents and profits, the Court has no power to appoint a Receiver, considers that the existence of the right to recover the rents and profits is not an indispensable pre-requisite and points out the distinction between Order XL, Rule 1, which follows the Judicature Act of 1873, Section 25, and Section 503 of the old Code which gave the Court power to appoint a Receiver only when it was 'necessary for the realisation, etc,' of a property, 'the subject of a suit or attachment'. The learned Judge, however, was of opinion that when the personal remedy was barred, a Receiver ought not to be appointed. He states that if the corpus is likely to deteriorate by acts of waste committed by the judgment-debtor, a Receiver could be appointed.

23. So far as the law in England as regards Receivers is concerned, equitable mortgagees have obtained orders for the appointment of Receiver.

24. In Crompton & Co., In re, Player v. Crompton & Co. (1914) 1 Ch. 954 : 83 L.J. Ch. 666 : 110 L.T. 759 21 Manson 200 : 58 S J. 433, Warrington. J, observes at page 987 Page of (1914) 1 Ch.: 'I think the right to the appointment of a Receiver in 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.'

25. In Hopkins v. Worcester and Birmingham Canal Co. (1868) 6 Eq. 437 : 37 L.J. Ch. 729, Sir G. M, Giffard, V.C., was of opinion that a creditor whose principal has become duo and who has given notice of demand is entitled to a Receiver ex debito justifio.

26. I may also refer to the decisions of Srinivasa Iyengar, J., in C.S. Nos. 399 of 1925 and 881 of 1925, where the learned Judge was of opinion that the Court has power to appoint a Receiver in the case of a simple mortgage although it can only make such an appointment where special circumstances are shown.

27. In C.S. No. 277 of 1928, I was of the opinion that a Receiver cannot be appointed following the decision in Chockalingam Pillai v. Pichappa Chettiar : AIR1926Mad155 . In that suit the authorities to the contrary referred to by me above were not cited and there was practically no argument.

28. Having regard to the authorities, I think the proposition stated by me that no Receiver can be appointed in a simple mortgage suit at the instance of a simple mortgagee is too wide. I think the result of the authorities is that while Courts would not ordinarily deprive the mortgagor of his possession in cases where the mortgage is a simple mortgage, there may be circumstances created either by the conduct of the mortgagor or connected with the state of the property which may render it necessary in the interests of justice and for the protection of the mortgagee that a Receiver should be appointed. It is impossible to lay down a hard and fast rule laying down under what circumstances the Court will appoint a Receiver. But ordinarily there should be some loss or detriment not foreseen by the mortgagee at the time when he chose to take a simple mortgage and allow possession to remain with the mortgagor which loss could not be compensated except by the appointment of a Receiver.

29. I think having regard to the facts of the present case the default of the mortgagors in paying the interest and the fall in value of the mortgaged properties, a Receiver should be appointed.


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