1. This is an appeal from an order of Gentle J, discharging a receiver, appointed by this Court in the following circumstances. The respondent, Tulsi Chandra Goswami, borrowed Rs. 6,50,000 from the appellants Bhabani Churn Law and Satish Churn Law on 6th September 1937 and executed in favour of the appellants an English mortgage of the greater part of his zemindari properties. One of the terms of that mortgage provided as follows:
It is hereby further agreed by and between the said parties that upon a suit being filed by the mortgagees or any of them or their or any of their heirs executors administrators representatives and/or assigns upon these presents, the mortgagees may forthwith and before the filing of the written statement or appearance in such suit by the said mortgagor, his heirs executors administrators representatives and/or assigns and without any further consent on his or their part than is herein contained may with the sanction of the Court get appointed such person or persons as they in their absolute discretion may nominate as fit to be the Receivers of the rents issues and profits of the mortgaged premises....'
2. The appellants instituted a suit for the enforcement of the mortgage on 16th January 1939 and applied to the Court for the appointment of a Receiver. Mr. S.N. Chatterjee Barrister-at-Law was appointed Receiver on 6th February 1939 and on that same date a preliminary decree was passed by consent in the mortgage suit. It was provided in the preliminary decree that Mr. S.N. Chatterjee be appointed Receiver of the mortgaged properties and of the rents issues and profits thereof, with instructions how to deal with the income. The material portion of those instructions is as follows:
5. Besides the usual powers the Receiver will have power to make settlement of the lands appertaining to the properties comprised in the mortgage with the previous consent in writing of the mortgagor and the mortgagees and to apply the selami and other moneys realised on such settlement in manner following:
(a) On payment of the costs charges and expenses of the Receiver and the mortgagees of and incidental to any such transactions to be certified by two respectable attorneys of the Court.
(b) On payment of the balance to the mortgagees towards satisfaction of their claims firstly towards interest and then towards principal for the time being due.
6. As regards other collections the same to be applied by the Receiver in the manner following:
(a) In payment of all rates taxes ground rent Government revenue, cesses, amounts due to the superior landlords including arrears and other overhead charges including annuity with arrears if any payable to Rani Bakulmoni Devi the mother of the defendant and all other outgoings in respect of the mortgaged properties.
(b) In payment of the Receiver's monthly remuneration and his establishment charges including office rent and other incidental expenses.
(c) In payment to the mortgagees towards their claims firstly for interest due and to accrue due to them including arrears and secondly towards part satisfaction of their claims.
3. The Receiver took possession of the mortgaged properties under this preliminary decree on or about 28th March 1939. Shortly thereafter, the respondent applied to the Court of Wards under Section 6 (e) of Bengal Act 9 of 1879 to be declared a disqualified proprietor. On 17th April 1940 an order was passed by the Court of Wards that
the Court of Wards is pleased to declare that the said Mr. Tulsi Chandra Goswami is a disqualified proprietor within the meaning of that section and that it is expedient in the public interest that the portion of the estate which is not in charge of the Receiver, appointed by the High Court should be managed by the Court of Wards....
4. Possession of the property of the respondent, other than that portion which was in charge of the Receiver appointed by the High Court was taken under Section 33, Court of Wards Act. A final decree for sale was passed in the mortgage suit on 31st July 1940. Mr. S.N. Chatterjee remained in possession as Receiver. On 18th August 1942, the respondent, through the manager appointed by the Court of Wards served notice of their intention to apply to the Court for an order discharging the Receiver and making over possession of the mortgaged property to the Court of Wards. The application was heard and allowed by Gentle J., on 1st March 1943. The mortgagees have appealed. Before Gentle J., it was argued firstly that it was for the benefit of all persons concerned that all the property of the mortgagor be managed by the Court of Wards, and secondly, that under Section 35, Court of Wards Act, the Court of Wards was entitled to take possession of all the property in spite of the order of this Court appointing a Receiver. In this Court Mr. S.M. Bose supported the order of Gentle J., on the second only of these grounds.
5. It seems to me obvious that however much the mortgagor and even the other creditors of the mortgagor might benefit from an order discharging the Receiver and giving possession of all the property to the Court of Wards, the mortgagees would be gravely prejudiced by such an order. As things are at present, a large proportion of the income from the mortgaged properties is paid to the mortgagees in settlement of their dues. If the Court of Wards takes possession of the mortgaged properties, the income will presumably be applied in the manner laid down in Section 48, Court of Wards Act. In that case, payment of a considerable sum for the support of the ward will have preference over any payment to the mortgagees; after payment of 41/2 per cent. interest to the mortgagees payment of 41/2 per cent. interest to other creditors will have preference over payments to the mortgagees of the balance of interest, not to mention principal; and payments of religious, charitable and other allowances out of the estate, and payment of the balance of all of other interest due to other creditors will have preference over payments to the mortgagees of any portion of the principal debt. When it is further realised that under Section 100, Court of Wards Act, there may be no payment even of interest for a period of four years, and thereafter no payment of any portion of the principal or a further period of seven years, it seems to me obvious that the mortgagees will be seriously prejudiced by the order appealed from. It has been suggested that if the Court of Wards takes possession of the mortgaged properties, the Court of Wards will give effect to the arrangement embodied in the preliminary mortgage decree. It might be possible under Section 48 of the Act, for the Court of Wards to do so by special order, but it is clear from the scheme of management drawn up (appearing at pp. 8 to 10 of the paper book) that such is not the intention of the Court of Wards; and if it were the intention, the whole proposed scheme would necessarily fail. In these circumstances, it does not seem to me possible to justify the order discharging the Receiver on the ground that it is just and convenient to do so. The only question is therefore whether under Section 35, Court of Wards Act, that Court is entitled to possession of all the property of the ward. The section reads:
Whenever the Court has determined to take the person or property of a disqualified proprietor under its charge, whether in accordance with an order of the civil Court, or otherwise, the Court shall make an order declaring the fact and directing that possession be taken of such person and property or of such property on behalf of the Court; and the Court shall be held to be in charge of such property from the time when possession shall have been so taken.
The section was in these terms when the Act was first passed and has remained unchanged in spite of considerable amendments to other sections. The section has presumably therefore the same meaning that it had when the Act was first passed.
6. Mr. S.M. Bose for the respondent does not contend that under this section the Court of Wards can dispossess tenants holding under a lease, or usufructuary mortgagees in possession of any portion of the property. He does contend however that the Court is entitled to take possession of all property of the ward which is not in the possession of a person who has a title thereto valid as against the ward. Mr. Bose argued that the Receiver is merely an agent of the mortgagor, and has therefore no interest in the property, and that consequently the Court of Wards is entitled to take the property out of the possession of the Receiver.
7. Dr. Basak for the appellants on the other hand contends that the Court of Wards is merely in the position of a manager and has no right or power greater than that of the ward. According to this view the Court of Wards is entitled to have the Receiver discharged only on grounds which would entitle the mortgagor to have him discharged. When the Court of Wards Act (repealing earlier Acts) was passed in 1879, there was no provision similar to that contained in Section 6(e) of the present Act; and the Court of Wards was entitled to manage the estates only of minors, lunatics, certain females and persons adjudged by a competent civil Court to be otherwise rendered incapable by physical defects or infirmities of managing their own property. No provision was made for scaling down the debts of a disqualified proprietor or for limiting in any way the rights of persons having valid claims against the proprietor. Apart from the provisions in part 3 (Sections 23 to 26) of the Act exempting estates from sale for arrears of revenue, and the provisions in Section 63, enabling the Court of Wards to realise arrears of rent by certificate procedure, the Act did, not purport to confer any privileges on the Court of Wards as against third persons which the ward would not have enjoyed under the ordinary law. In fact the Act dealt almost entirely with the question of ascertaining what persons were to be disqualified and with questions arising between the Court of Wards and other persons claiming to represent the ward and persons in the employment either of the ward or the Court of Wards. The only sections dealing with the rights of outsiders were Section 14, which enabled the Court to do all such things requisite for the management of the property, as the ward if not disqualified, might have done; and Section 37 which enabled the Collector to call upon employees to appear before him and to deliver up papers, accounts and moveable properties, and to call upon tenants to appear and produce their title deeds.
8. The Act was amended in 1892 and Sub-section (e) of Section 6 was introduced. Even then no provision was made for scaling down the debts of a ward, or for giving a ward special protection against his creditors. It was not then possible for a dishonest debtor who happened to be the proprietor of a revenue paying estate, to cheat his creditors by simply applying to the Court of Wards to be declared a disqualified proprietor. Provisions for scaling down debts and protecting the ward against his creditors were first introduced into the Act by the amending Act of 1907 and it is interesting to note how limited was the protection against the execution of decrees against the property of the ward. Section 100 as inserted by the amending Act of 1907 reads:
If a civil Court has directed any process of execution to issue against any immoveable property of a ward, or the rents thereof, or any crops standing thereon, the Court of Wards may, at any time within one year after it assumes charge of such property apply to the civil Court to stay proceedings in the matter of such process; and the civil Court may, on such terms regarding interest and compensation for delay as may appear to it to be just and reasonable, stay such proceedings for such period as it may deem fit.
9. It seems to me clear that until 1907, it was never contemplated that the Court of Wards should claim any privileges against the creditors of a ward, which the ward himself, if not disqualified, could not have claimed. It follows that except in so far as it is so provided in express terms in the Act, the Court of Wards has only the same right as against creditors of the ward which the ward himself, if not disqualified would have, and that Section 35 does not give the Court of Wards any better right to obtain possession of a particular property than the ward himself, if not disqualified, would have. In this view of the law, I am of opinion that the Court of Wards is entitled only to move the Court for discharge of the Receiver on grounds which would entitle the ward himself, if not disqualified, to move the Court. In the present case, if Tulsi Chandra Goswami, were not a disqualified proprietor, the grounds urged in support of the application for discharge of the Receiver, would be considered quite inadequate, and the application would undoubtedly be rejected. I am of opinion therefore that the application of the Court of Wards for discharge of the Receiver should have been rejected.
10. I agree.
11. The appeal is allowed with costs to the appellants both here and below. The interim order is discharged. Certified for two counsel.