J. Kishenlal Phoolchand Vs. A. Rathan Singh - Court Judgment

Vasudevamurthy, J.

1. The appellant, who is the plaintiff in the Court below, has filed a suit to recover, Rs. 1,15,000/- principal plus Rs. 4,662-8-0 interest on the foot of a deed of simple mortgage admittedly executed by the defendant on 8-1-1951. It bears the endorsement of the Sub-Registrar that the amount was paid in his presence. The defendant has pleaded that he has not received full consideration for the document and has asked for a re-opening of some previous transactions between himself and others Which, according to him, have a bearing on the consideration for the suit document.

2. In March 1953 the plaintiff made an application for the appointment of a Receiver for managing and protecting the mortgaged properties and for the collection of rents and profits. In the affidavit annexed to the application, he represented that nearly Rs. 1,41,000/- were due to him by that date including costs, that though in the mortgaged deed the respondent had expressly covenanted with the plaintiff that the mortgaged properties were all free from encumbrances except those set out in it he had recently come to know that some of the items had been already mortgaged to one Ambaram Fakirbhai in July 1942, that the latter had filed two suits O.B. Nos. 56 and 57 of 51-52, obtained decrees for sale and had been executing the said decrees and that a sum of Rs. 22,000/- was stated to be due to him under those decrees and that though the respondent had agreed to pay interest at one per cent, per mensem regularly he had not paid any amount towards interest from the date of mortgage though he was realizing a sum of Rs. 920/- for rent. .

In the meantime the value of the mortgaged properties was falling and in the event of a decree there was no chance of his realizing the full amount due to himself as some of the plaint items were now to be subject to the prior encumbrance in favour of Ambararn Fakirbhai, He estimated the present value of the properties at Rs. 1,33,500/- after deducting the amount due under the previous mortgage in favour of Ambaram Fakirbhai.

3. In the counter affidavit the defendant pleaded that the plaintiff was aware about the encumbrances and that one Khanmull Ganeshmull who was acting for the plaintiff had applied or promised to apply for an encumbrance certificate and had collected the necessary charges from himself. The suit mortgage deed was got drawn up by Ganeshmull who for some reason did not incorporate therein the two mortgages in favour of Ambaram. The value of the properties mortgaged was according to him Rs. 4,11,000/- and they were fetching rent of Rs. 680 and not Rs. 920/- as alleged. He characterized the plaintiff's application as 'mala fide'.

4. The learned District Judge who heard theapplication refused to appoint a Receiver. Hewas inclined to believe that the value of theimmovable properties had fallen; but he thoughtthat, as ordinarily money-lenders advance loansonly up to 40 per cent, of the value of theproperties, the mortgaged properties were of sufficient value and continued to be good security forthe plaintiff's loan. He said:

'I am not just now in a position to know thereal or probable market value of properties.However it is significant that the fact of aprior mortgage was not embodied in the suitmortgage deed, and at this stage, it may beinferred that the defendant did not have itembodied. But the application was filed about8 months after the suit and ordinarily a simplemortgagor has a right to remain in possessionand appropriate the profits of the mortgagedproperty till the sale has actually taken place.'

He thought that though the amount was heavy itcould not be said that the arrears had fallen duefor a long period of time. The plaintiff has comeup in appeal against that order.

5. It is difficult to support the learned District Judge's order. That some considerable amount is due to the plaintiff is not denied by the defendant. It is also not denied that no interest at all has been paid to the plaintiff though more than four years have now elapsed since the date of the mortgage. It is not clear how the learned District Judge considers that a creditor advances only 40 per cent, of the value of the property. Section 66, Transfer of Property Act, provides that a security is sufficient only if--in the case of mortgaged buildings--they are at least twice the value of the debt. It cannot be believed that the value of the properties is Rs. 4 lakhs and odd as represented by the defendant if the rent which he is realizing from them is only Rs. 680/- per month. If the rent is capitalized as 162/3 x 10 months' rent it would amount to Rs. 1 lakh and odd. Admittedly there are two prior mortgages for which decrees have been obtained and execution has been sought in respect of some of the items mortgaged.

It is represented for the respondent that he has not chosen to raise the rent of the buildings and that the tenants have continued to pay the same rent from a long time. This would indicate either that the respondent is unable to manage his affairs properly, if he is not sufficiently interested in realizing the proper rents especially when he is so heavily indebted, or that the premises are not kept in proper repair and management. It appears to be therefore thoroughly just, reasonable and convenient to appoint a Receiver in the present case. The respondent can certainly be not said to be justified in asking that he should be collecting all the rents and utilising them himself without paying a single pie even towards his admitted and just debts for which decrees have been obtained and which would vitally affect the plaintiff's security. The circumstance that the plaintiff has made an application for the appointment of a Receiver some time after the suit was filed and not immediately and probably after Ambaram obtained decrees and started to proceed against the mortgaged property is indicative of bona fides and an anxiety to safeguard his own interest rather than otherwise.

6. 'Abdul Basid Sab v. Sahukar Sardarmul Multan Mull', 12 Mys LJ 495 (A) is a clear authority for the position that ft Receiver can be appointed at the instance of a simple mortgagee. The learned District Judge has tried to distinguish that case on the ground that there was an allegation of waste of the mortgaged property made in it. But it has been laid down in that case that apart from the allegation of waste there was a distinct allegation that nearly Rs. 8000/- interest had not been paid and that circumstance was a sufficient ground to justify the order of appointment of a Receiver in a suit on a simple mortgage. The cases in -- 'Ethirajalu Chetty v. Rajagopalachari', AIR 1929 Mad 138 (B), -- 'Paras Ram v. Puran Mal-Ditta Mar, AIR 1925 Lah 590 (C); -- 'Punjab National Bank Ltd. v. Moosaji Jafferji', AIR 1927 Sind 230 (D); --'Abdul Khairat Mahommad v. Hrishikesh Das', AIR 1926 Gal 978 (E) and -- 'Manindra Chandra v. Suniti Bala Debi', AIR 1926 Cal 1006 (F), are referred to therein in support of that position; see also -- 'Venkenna v. Mangammal'. AIR 1936 Rang 296 (SB) (G) and -- 'Rameswar Singh v. Chuni Lal', AIR 1920 Cal 545 (H), which are to the same effect.

7. In -- 'AIR 1929 Mad 138 (B)' it is pointed out that

'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.'

This case has been referred to and followed in --'Paramasivan Pillai v. Ramasami Chettiar', AIR 1933 Mad 570 (PE) (I).

8. In -- 'AIR 1920 Cal 545 at p. 547 (H)' when dealing with the contention that a Receiver could not be appointed at the instance of a simple mortgagee their Lordships observed that the sane was not based on principle and that there was 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.

9. The learned District Judge has referred to -- 'Anandi Lal v. Ram Sarup' : AIR1936All495 which lays down the contrary. That decision was based on the interpretation of the words 'any person' in Order 40, Rule 1 as meaning even parties to the suit, and held that as a simple mortgagee has no present right to remove the opposite party from possession and custody he cannot get a Receiver appointed to the property mortgaged to him. That decision was later on considered by a Full Bench in -- 'Mt. Tulsha Devi v. Shah Chironju Lal' : AIR1943All1 and Iqbal Ahmed C.J. observed that the Division Bench which heard the appeal had entertained considerable doubt about the accuracy of that decision and that the answer to the question whether Clause (ii) of Rule 1 of Order 40 has application only to properties in the possession Of third parties or is also applicable to the properties in the possession of one of the parties to the litigation is beset with considerable difficulty and there is considerable divergence of judicial opinion on the point. The Full Bench considered advisable that, in order to set the doubt at rest so far as their Courts were concerned, the rule should be so amended as not to leave any doubt as to the true interpretation of Clause (ii) of Rule 1 of Order 40. They themselves left the question open as they felt it unnecessary to decide it in the case before them. Subsequently the rule was amended in Allahabad as referred to in -- 'Bireshwar Banerji v. Sudhansu Shekhar Singh', AIR 1947 All 157 (L). By that amendment the words 'not being a party to the suit' were inserted after the word 'person' in Sub-rule (ii).

10. It must be observed that the wording of Order 40, Rule 2 in the Code of Civil Procedure as in force in Mysore is the same as in Madras and Calcutta; and nevertheless those Courts have not considered the same as any bar to the appointment of a Receiver in suits on a simple mortgage. They seem to be based on the principle that by appointing a Receiver in such a case the mortgagee is not really seeking to deprive the possession by the mortgagor of the mortgaged property or to obtain possession for himself but is ensuring that the same is managed for the benefit of the mortgagor and on his behalf so that its income and profits which may be said to be accretions to the mortgaged property may be made available and applied towards the discharge of the mortgage debt and that the Court by such appointment is merely ensuring the payment of interest to the mortgagee as agreed to by the mortgagor and that the appointment of a Receiver is only a mode of realizing the security even in the case of a simple mortgage; see -- 'AIR 1933 Mad 570 at pp. 574, 581 and 582 (FB) (I)'. They also base their decisions on principles of English law in such matters; see -- 'AIR 1920 Cal 545 (H)'; -- 'Jaikissondas Gangadas v. Zenabai, 14 Bom 431 (M). In any event we are bound by the decision of this Court which appears to us, if we may say so with respect, to be in consonance with justice and equity.

11. We, therefore, allow this appeal and set aside the order of the Court below. The District Judge is directed to appoint a proper person as Receiver with powers to manage the properties, collect the rents and deposit the same in Court. There will be no order as to costs in this appeal.

12. During the course of the arguments in the appeal before us it was agreed for the appellant that a sum not exceeding Rs. 200/- per month may be paid out of the rents so collected to the defendant till the disposal of the suit for his current expenses. The learned District Judge will give effect to the same.

13. The suit was filed more than two years ago. The matter involved appears to be simple, and it is surprising that the suit has not been disposed of till now. It is hoped that the learned District Judge will do so expeditiously.

14. Appeal allowed.