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Rashmani Dasi and anr. Vs. Baroda Kant Sarkar and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Judge
Reported in28Ind.Cas.31
AppellantRashmani Dasi and anr.
RespondentBaroda Kant Sarkar and anr.
Cases ReferredHenderson v. Skerrett
Excerpt:
surety of receiver - extent of liability--principle--test--surety's remedy. - .....costs as may be thrown on the receiver. the objection of the surety as regards the costs of the account proceedings and the interest allowed on sums for which the receiver did not duly account, must consequently be overruled.3. as regards the interest allowed to the plaintiffs against the receiver on the sum which they were compelled to bring into court at the instance of the latter, the surety has argued that he is not liable. there is apparent force in this contention, but upon closer examination, the objection turns out to be groundless. the deposit was intimately associated with the discharge of the duties of the receiver and of his liability to render an account of the rents and profits received by him. the receiver was called upon to account. he submitted a statement of.....
Judgment:

1. This is an application, under Section 145 of the Code of Civil Procedure of 1908, to enforce the liability of a surety. The circumstances under which the surety-bond was executed may be shortly stated. On the 14th August 1909, one Baroda Kant Sarkar was appointed Receiver to the estate of Mahendra Narayan Patra, at that time the subject-matter of an administration suit in the Court of the third Subordinate Judge of the 24-Perganahs. The Receiver was appointed on condition of his furnishing personal security for Rs. 5,000. The Receiver took possession of the estate and received the rents and profits, but never furnished the security. Proceedings were subsequently instituted in the Court of the Subordinate Judge to take the accounts of the Receiver. The Subordinate Judge directed that the estate be released, if the plaintiffs brought into Court, for payment to the Receiver, a specified sure of money to enable the latter to discharge the liabilities which, he alleged, he had incurred for the benefit of the plaintiffs in the course of the management of the estate. The deposit was made under protest. The plaintiffs next applied to this Court for proper directions as to the mode in which the accounts of the Receiver were to be taken and obtained an ad interim order that the sum deposited might be retained in Court till the accounts had been fully investigated. The decision of this Court, upon the questions raised at that stage, will be found in our judgment, dated the 29th May 1911 Mohini Mohan Patra v. Baroda Kant Sarkar 12 Ind. Cas. 780 : 14 C.L.J. 445. The proceedings to take the accounts of the Receiver were subsequently transferred to this Court, and while a report on his accounts by a Commissioner and the objections thereto were under examination here, it was discovered that he had not furnished security as directed by the Court which had appointed him Receiver. This Court, thereupon, on the 8th April 1913, directed him forthwith to furnish the security. This order was carried out on the next day, and one Shama Kant Chatterjee executed a surety-bond along with the Receiver. By this bond, the executants jointly and severally bound themselves to pay to the Registrar of this Court a sum of Rs. 5,000. The material portion of the bond is in these terms: 'The condition of this obligation is such that if the above bounden Baroda Kanta Sarcar shall duly account for all and every the sum and sums of money which he has already received on account of the rents and profits of the immoveable property of the said estate and shall duly pay the balance which shall be certified to be due from him as this Court shall direct, then this obligation shall be void otherwise, it shall remain in full force.' The accounts have now been taken and it has transpired that not only is the Receiver not entitled to receive any money from the plaintiffs, but he is liable to pay Rs. 6,708 to the plaintiffs, ns determined by our order, dated the 23rd July 1913 Baroda Kanta Sarkar v. Rashmani Dasi 28 Ind. Cas. 25 : 20 C.L.J. 113. The plaintiffs have now applied to this Court for an order upon the surety under Section 145 of the Code for the payment to them of Rs. 5,000 or of such smaller sum as remains unpaid by the Receiver to them under the orders of this Court. On behalf of the surety, objection has been taken to three of the items for which the Receiver has been made liable to the plaintiffs, namely, first, costs of the proceedings to take accounts, secondly, interest on the sums for which the Receiver has not duly accounted, and, thirdly, interest on the sum deposited by the plaintiffs in Court at the instance of the Receiver for the release of the estate. It has been argued that though the Receiver may have been made justly liable to the plaintiffs for all these sums, the surety is under no obligation to pay them, though, he concedes, he is responsible for the principal money for which the Receiver has not duly accounted. We are of opinion that the objections taken by the surety are not well-founded.

2. It is well-settled that the surety for a Receiver is liable to the payment of interest on balances improperly retained by him as also for the costs of proceedings in Court necessarily or properly incurred in consequence of the Receiver's default, such as the costs of a proceeding to take accounts, of an attachment for failure to account, of an application for his discharge and for the appointment of another person in his place, and of any proceedings taken to enforce the recognizance. The leading decision on the point is that of Sugden, L.C. in Maunsell v. Egan (1846) 9 Ir. Eq. Rep. 283 : 3 Jo & Lat. 251 where he affirmed the decision of Blackburn, M.R. in Maunsell v. Egan (1845) 8 Ir. Eq. Rep. 372. As the Lord Chancellor pointed out, the condition was that the recognizance shall be void if the Receiver shall duly account for sums received and shall duly pay the balance found due; the costs of the proceeding' to take the accounts have been incurred as the necessary consequence of the neglect of the Receiver duly to render an account, and the liability for interest is also attributable to the same cause. The recognizance has, therefore, become absolute, and to the extent of the sum for which it was acknowledged, the surety must be responsible for the loss occasioned by the default which rendered the recognizance absolute. This exposition has been repeatedly followed: MacDonaghs, In re (1876) 10 Ir. Eq. Rep. 269; Smart v. Flood (1883) 49 L.T. 467; Walters v. Walters (1877) 11 Ir. Eq. Rep. 335; In re Nugent's Estate (1897) 1 Ir. R. 464 : 3 Irish Law Reports 218. In the case of In re Graham; Graham v. Noakes (1895) 1 Ch. 66 : 64 L.J. Ch. 98 : 13 R. 8 : 71 L.T. 623 : 43 W.R. 103, Chitty, J. referred to the judgment of Eldon, L.C. in Dawson v. Raynes (1826) 2 Russell 466 at p. 471 : 38 E.R. 411 : 26 R.R. 149 and stated the law in these terms: 'The surety is answerable to the extent of the amount of the recoginzance for whatever sum of money, whether principal, interest or costs, the Receiver has been liable, including the costs for his removal and of the appointment of a new Receiver in his place.' We may take it, then, as the general rule that the surety of a Receiver is answerable, to the amount secured by his recognizance, for such interest as well as for such principal as the Receiver is liable to pay, and also for such costs as may be thrown on the Receiver. The objection of the surety as regards the costs of the account proceedings and the interest allowed on sums for which the Receiver did not duly account, must consequently be overruled.

3. As regards the interest allowed to the plaintiffs against the Receiver on the sum which they were compelled to bring into Court at the instance of the latter, the surety has argued that he is not liable. There is apparent force in this contention, but upon closer examination, the objection turns out to be groundless. The deposit was intimately associated with the discharge of the duties of the Receiver and of his liability to render an account of the rents and profits received by him. The Receiver was called upon to account. He submitted a statement of accounts, which was accepted by the Subordinate Judge without due scrutiny and which showed that he as Receiver was entitled to obtain a large sum from the plaintiffs. The plaintiffs protested that the accounts were unreliable, that nothing was duo from them, and that if the accounts were properly taken, they would be found entitled to receive a large sum from the Receiver. The Court, at the instance of the Receiver, summarily overruled this objection, and compelled the plaintiffs to bring into Court the sum claimed by the Receiver as due to him on his accounts, so as to enable him to apply the money to discharge the liabilities which, he alleged, he had incurred for the benefit of the plaintiffs. The plaintiffs were compelled, in these circumstances, to bring the money into Court. The accounts were then examined in detail by order of this Court, and it transpired ultimately that the claim of the Receiver against the plaintiffs was wholly unfounded. The Court accordingly held the Receiver liable for interest on the sum which the plaintiffs had been obliged to deposit at his instance. We are of opinion that for this sum also, the surety is liable on his bond, as it is not fairly distinguishable from the interest the Receiver was held liable to pay on sums for which he had not duly accounted. The principle is that the liability of a surety upon the bond of a Receiver conditioned for the due discharge of his duties is limited to cases of a violation of those duties which may properly be said to be within the scope of his appointment as Receiver, in other: words, the surety is responsible only in respect of liability incurred by the Receiver in his capacity as Receiver: In re Walker (1907) 2 Ch. 120 : 76 L.J. Ch. 580 : 96 L.T. 864 : 51 S.J. 482., Board of Trade v. Employers Liability Assurance Corporation (1910) 2 K.B. 649 : 79 L.J.K.B. 1001 : 102 L.T. 850 : 54 S.J. 581 : 26 T.L.R. 511. To determine whether a particular liability has been incurred by the Receiver in his capacity as Receiver, the test to be applied is, could the Receiver be made accountable in that respect in the account proceedings; if he could not, the surety is not liable; if he could be held liable in that proceeding as Receiver, the surety is liable. Here, the Receiver contended, in the proceedings to take his accounts, that the plaintiffs were bound to proceed against him by way of a separate suit to recover the interest on the deposit. This was overruled, on the ground that the liability he had incurred arose out of an act done by him in the discharge of his duties as Receiver, and not in relation to a matter beyond the scope of his appointment. This shows conclusively that the objection in the present case is not sustainable.

4. We direct accordingly that an account be prepared of the sum still due to the plaintiffs from the Receiver under the order of this Court after deduction of the various sums which have been paid from time to time and that the surety be called upon to deposit the balance in this Court within one month of the date on which notice of the ascertained amount is served on him. We may add that when the surety thus satisfies the claim of the plaintiffs, he will be entitled to stand in the place of the Receiver to the extent of this payment made by him, and, to reimburse himself from the sums ordered to be paid by the defendant, Ram Narain Patra, to the Receiver Glossop v. Harrison (1814) Cooper 61 : 3 Ves. & B. 134 : 35 E.R. 429; In re, British Power Traction Co. Halifax Bank v. British Power Traction Co. (1910) 2 Ch. 470 : 79 L.J. Ch. 666 : 103 L.T. 451 : 54 S.J. 749 without derogation of his right to sue the Receiver: Henderson v. Skerrett (1842) 5 Ir. Eq. Rep. 404. There will be no order as to the costs of these proceedings.


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