CIVIL APPELLATE, JURISDICTION: Civil Appeal No.110 of 1961. Appeal by special leave from the judgment and order dated October 14, 1960, of the Allahabad High Court in First Appeal from Order No. 41 of 1959.

C. B. Agarwala, Rameshwar- Nath, S. N. Andley, J. B. Dadachanj and P. L. Vohra, for the appellant. K. B. Choudhuri, A. K. Kirty and Ratna Rao, for respondent No. 1.

S. P. Sinha and M. I. Khawaja, for respondents Nos. 2, 3 and 4.

H. N. Sanyal, Additional Solicitor-General of India and G. C. Mathur, for respondent No. 5.

Naunit Lal, for respondent No. 7.

1961. April 11. The, Judgment of the Court was delivered by SUBBA RAO, J.-This appeal by special leave is directed against the judgment dated October 14, 1960, of the High Court of Judicature at Allahabad confirming the order passed by the Civil Judge, Agra, directing the Official Receiver to take possession of the property of the appellant. This case illustrates how the enforcement of an interlocutory order appointing a Receiver made in the interest of all the parties concerned could be obstructed and the object of the order itself be defeated by dilatory tactics adopted by one party or other.

At Agra, there were three spinning mills and one flour mill, all of which together were described as the Johns Mills; and, originally, the John family or their predecessors were the owners of all these mills. At the time the present proceedings were initiated, other persons had acquired interest therein. The following persons were the joint owners of the mills: (1) Hiralal Patni, the appellant, and Munni Lal Mehrt… 19/40^th share; (2) Gambhirmal Pandiya Private Ltd…. 8/40^th share; (3) Messrs. John & Co …. 11/40^th share; and (4) I.E. John … 2/40^th share. Seth Loonkaran Sethiya, respondent No. 1, advanced large amounts to Messrs. John & Co. on the security of its business assets and stocks. On April 18, 1949, the said Sethiya filed 0. S. No. 76 of 1949 in the Court of the Civil Judge, Agra, against John & Co. for the recovery of the amount due to him by sale of the assets of the said company. To that suit the partners of Messrs. John & Co., for convenience described as "defendants 1^st set", and the partners of Messrs. Johns Jain & Co., who were for convenience described as "defendants 2^nd set", were made parties. Pending the suit, the said Sethiya filed an application, under O. XL, r. 1, Code of Civil Procedure, for the appointment of a Receiver. By an order dated May 21, 1949, the learned Civil Judge appointed two joint Receivers and directed them to run the three spinning mills. Hiralal Patni filed an appeal against that order to the High Court at Allahabad, and the said Court by its order dated August 22, 1949, modified the order of the Civil Judge confining the order of appointment of Receivers only to the share of Messrs. John & Co. in John Jain Mehre & Co. Loonkaran Sethiya made another application in the Court, of the Civil Judge for the appointment of a Receiver for the property of Hiralal Patni and the learned Civil Judge by his order dated December 1, 1951, directed the Receivens to take possession of the appellant's share in the mills also Against this order an appeal was preferred to the High Court and the operation of the said order was stayed pending the disposal of the- appeal. On April 5, 1954, the Civil Judge passed a preliminary decree against the defendants therein directing them to deposit the decree 'amount in court within the prescribed time, and in default the plaintiff was given a right to apply for a final decree for sale of the business assets of the defendants. The decree also gave a right to apply for a personal decree in case the sale proceeds were not sufficient to discharge the decree. The preliminary decree directed that the Receivers should continue on the property until discharged. Hiralal Patni preferred a appeal to the High Court against the said preliminary decree and applied for interim stay of its operation. On August 23, 1955, the High Court discharged the Receiver,,; appointed by the learned. Civil Judge, and appointed another Receiver in their place. On March 25, 1955, the learned Civil Judge prepared a scheme for running the mills, and the parties preferred appeals against that scheme to the High Court. The said appeals were compromised and under the term-, of the compromise the parties agreed to take different mills on lease for a period of three years from the Receiver. On January 14, 1956, the Receiver executed a lease in respect of the flour mill in favour of Hiralal Patni for a period of three years. Under the lease deed it was agreed that he should deliver the demised premises to the Receiver upon the expiry of the term. In due course, on March 14, 1956, a final decree was made in the suit for the sale of the properties, but the final decree was silent in regard to the Receiver appointed earlier. On September 29, 1958, Hiralal Patni applied to the High Court for extension of the lease by three years. On January 16, 1959, the High, Court rejected the application on the ground that the lease was only a stopgap arrangement and that it was for the Receiver to make a fresh arrangement for the future under the supervision and directions of the Civil Judge, Agra. On January 17, 1959, the Receiver applied to the Civil Judge for instructions whether he should proceed at once to dispossess the appellant. On notice, Hiralal Patni raised various objections and claimed that he was entitled to remain in possession of the property as its owner. The learned Civil Judge disallowed his objections and held that the Receiver derived his authority from the preliminary decree, and directed the Receiver to lease out the said flour mill by auction for a period of two years. Pursuant to that order, an auction was held, and the appellant was the highest bidder, and he paid the lease amount and executed a formal lease deed. Not satisfied with the order of the Civil Judge, Hiralal Patni preferred an appeal to the High Court. The High Court in an elaborate judgment considered the contentions raised on behalf of Hiralal Patni and dismissed the appeal. Hence the present appeal. Learned counsel for the appellant raised before us the following three contentions, which the appellant, unsuccessfully raised before the High Court as well as before the Civil Judge. (1) On a true construction of the relevant orders the Receiver has no power to dispossess the appellant in such a way as to prevent him from working his flour mill. (2) After the passing of the final decree, though the Receiver may continue for the purpose of accounting and discharge of debts, he cannot exercise any powers in respect of the rights of the parties. And (3) in any view, as the appellant acquired a right under a lease deed and continued in possession after its expiry, he could be dispossessed only by a suit and not by a summary procedure.

The first question turns upon the construction of the relevant orders. The Civil Judge appointed two joint Receivers by an order dated May 21, 1949. It it not necessary to consider the said order as the final order that governed the rights of the Receiver and the parties was that made by the High Court on appeal on August 22, 1949. After considering the contentions of the parties, the High Court came to the conclusion that a Receiver should be appointed to be in charge of the entire property, immoveable and move. able, of the defendants 1^st set for its protection and preservation. The order of the High Court described the John family as defendants 1^st set to the suit, and defendant 5, Hiralal Patni, defendant 6, Munnilal Mehra, and Messrs. John Jain Mehra & Co. as defendants 2^nd set. This order was confined only to the properties of defendants 1^st set. The High Court further proceeded to state:

"In the finance agreement in plaintiffs

favour, the plaintiff was not given any right

to enter into possession on non-payment or to

run the mills…… There being no right given

to the plaintiff to enter into possession and

manage the mills or to have a receiver

appointed, a receiver can be appointed only

under Order 40, rule 1 of the Code of Civil

Procedure."

Adverting to the contention raised by the defendants that a Receiver could not be appointed to run the mills, the High Court observed:

"In view of the order that we propose to pass

today we do not want to go into that question.

In case the mills are not run under the order

of the Collector under the United Provinces

Industrial Disputes Act, or by the partners we

propose to give the parties permission to move

this court. In case we decide to appoint a

receiver to run the mills we shall then

consider whether a receiver can or cannot be

appointed for the purpose of running the

mills."

Then the High Court stated:

"We have already set out the circumstances

which in our opinion make it necessary that a

receiver should be appointed to take charge of

the property of defendants first set whether

under the finance agreement of July 1948 there

was a charge created on the property, moveable

and immoveable, or not. The Receiver will not

interfere with the running of the mills except

under express orders of the Court and to the

extent when it becomes necessary by reason of

the value of the security being jeopardized by

any action of the defendants."

Then the High Court pointed out that the Collector had the power under s. 3 of the Industrial Disputes Act to make arrangements for the running of the mills. Finally the High Court observed: ,

"It may be necessary from time to time to give

directions to the receiver. The parties may

also want portions 'of this order to be

clarified or other directions obtained. The

lower court may give such directions to the

receiver or to the parties as it may consider

just and proper. In case further directions

are necessary or the receiver or the parties

are not satisfied with the directions given

they may move this court for further

direction."

Shortly stated, the High Court confirmed the order of the Civil Judge appointing the Receivers and directed them to take charge of the properties of defendants 1^st set. The High Court expressly prohibited the Receivers from interfering with the running of the mills except under express orders of the court, for at that time it did not think it necessary to direct the Receivers to do so. It may be recalled that the Receivers were not appointed for the flour mill of the appellant, Hiralal Patni, as he was one of the defendants belonging to the 2^nd set. Learned counsel for the appellant contends that this order did not put the mills in the possession of the Receivers and that the Receivers were given only a supervisory control over the share of the defendants 1^st set in the mills. Whatever terminology may have been used, the fact remains that the Receivers were put in charge of the entire property of defendants 1^st set, which includes their share in the mills, though it was equally made clear that the Receivers could not directly run the mills without further directions in that regard.

The Civil Judge by his order dated December 1, 1951, directed the Receivers to take possession of 'the share of defendants 2^nd set also. The operative portion of that order reads:

"For all these reasons I have come to the

conclusion that it is just and convenient that

a receiver should be appointed over the share

of the defendant 11 set, and I order that the

present receivers who are in possession of the

defendant 1^st set share should also be

appointed receivers over the share of the

defendant 11 set. As for the prayer allowing

the receivers to run the mills the question of

running of the mills is already before the

High Court as is shown by the compromise dated

8^th September 1950. It is not known what has

happened after this compromise. The receivers

are directed to seek the direction of the

Hon'ble High Court on the question of the

running of the mills so that there may be no

chance of conflicting of orders passed by this

court and the Hon'ble High Court, on this

matter. The receivers will not interfere with

the running of the mills except under express

orders of this court and to the extent when it

becomes necessary by reason of the value of

the security being jeopardized by any action

of the persons running the Mills. The

receivers are appointed over the share of the

defendants II set only, for the purpose of

preservation and protection and realization of

the rent."

This order runs on the same lines indicated by the High Court in its earlier order in respect of the share of defendants 1^st set. What is to be noted is that under this order the Receivers were prohibited from' running the mills except under the specific' orders of the said court or of the High Court. On April 5, 1954, a preliminary decree was made in the suit, and under that decree the defendants were directed to deposit a sum of Rs. 18,00,152 in court within the prescribed date and in default the plaintiff was given a right, to apply for a final decree for the sale of the assets of the spinning mills. There was a further direction that in case the nett sale proceeds of the said property were found insufficient to satisfy the plaintiffs claim, the plaintiff would get a personal decree against defendants 1^st set and defendants 2^nd set for the balance of his claim. The Receivers were directed to continue on the property until discharged. Under the preliminary decree, the plaintiff became entitled not only to the sale of the assets of the spinning mills but also to a personal decree against all the defendants for recovering any balance that might still be due to him after the sale of the said properties. What is more, the Receivers were expressly directed to continue till they were discharged, and as the decree did not specify the powers of the Receivers, it must be held that they continued to exercise such powers as they had under the previous, orders of the courts dated August 22, 1949 and December 1, 1951.

On March 25, 1955, the learned Civil Judge, Agra, prepared a scheme for the running of the three spinning mills, and the parties preferred two appeals to the High Court against the scheme. On July 22, 1955, a compromise was effected between the parties in the aid two appeals and the appeals were disposed of in terms of the compromise by order of the High Court dated August 23, 1955. As the terms of this order are rather important in the context of the contentions raised before us, we would read the relevant portions hereof:

Clause 1. That the aforesaid parties have

without prejudice to their rights and

litigation between them have after deliberate

consideration and as a special effort to make

arrangements for running the Johns Mill have

decided that the three spinning Mills and

Flour Mill situate in Agra should be run by

the parties in accordance with the terms and

conditions set forth below.

(vi) That the lease shall be granted by the receiver on terms and conditions approved by the Court.

(ix) If any lessee shall fail to run the Mill

after delivery of possession or pay the lease

money or fail to carry out the arrangements

arrived at between the parties for a period of

three months, the receiver shall take

possession of the Mills and with the per-

mission of the court shall lease out that

particular mill to any of the parties

excepting the party in default who may offer

the highest bid in accordance with the orders

passed by the Civil Judge in this matter.

Clause, 4……………………………

The arrangement embodied in this document is

only for the purpose of working the mills by

the petitioners. Nothing contained in this

document will affect the rights and obligation

of the parties which are or may be the subject

matter of suit No. 76 of 1949 or in any

litigation between the parties and

notwithstanding anything contained herein but

subject :however to the express provision in

the preceding paragraph of this clause it will

be open to the petitioners to seek their

remedies in any manner provided by law, and

without prejudice to the rights of the parties

to obtain a stay order from the Hon'ble High

Court or any other Court."

What is the effect of this order? Learned counsel for the appellant contends that this order embodies an internal arrangement between the defendants for running the mills and that it does not in any way enlarge the scope of the orders dated August 22, 1949, and December 1, 1951, under which the Receivers were appointed. We do not think that the scope of the orders is so limited. The combined effect of the said earlier orders was that the Receivers should take possession of the entire properties of the two sets of defendants. But the Receivers were not given the power to run the mills without specific directions to that effect by the court. The Civil Judge by his order dated March 25, 1955, evolved a scheme for running the mills, and by that order he laid down the conditions and directed the Receivers to advertise calling for applications from persons, including the Govern-ment, who were willing to run the mills. This order was only confined to the three spinning mills. The compromise order in the appeals covered also the flour mill. Though different mills were to be run by different defendants by obtaining lease deeds, that was only a mode evolved for running the mills tinder the supervision of the court. Under the compromise, the leases were to be executed in favour of the Receiver. It also provided that in case the lessees did not carry out the terms of the lease, the Receiver should take possession of the mill in respect of which default was committed and, with the permission of the court, should lease out the mill to any of the defendants other than the defaulting party. The clauses saving the rights of the parties obviously refer to their rights which were the subject-matter of the suit and they could not have any reference to the terms agreed upon under the compromise order. Under the compromise order, the courts, though by consent, gave directions for running the mills which they left out for future consideration in their earlier orders. The result, was that under the earlier orders, all the properties of the defendants were put in possession of the Receivers, and under the compromise order, the Receiver was directed to run the mills under the agreed scheme. Pursuant to the terms of the compromise order, on January 14, 1956, the Receiver executed a lease in favour of the appellant in respect of the flour mill for a period of three years, and under that lease deed the appellant got possession from the Receiver and agreed "To yield up all the demised premises with all fixture, improvement and replacements thereto in good and tenantable repair and condition in accordance with the lease covenants in that behalf herein contained upon the expiry of the term hereby created or the sooner determination of these presents as herein provided." Whatever ambiguity there may have been, this lease deed dispels it, for under the lease deed the appellant admits the legal possession of the Receiver, takes a lease under him, and agrees to put him back in possession after the expiry of the lease. On September 29, 1958, the appellant again applied to the court for extension of the lease for three more years, thereby accepting his possession under the Receiver, though the court on January 16,1959, dismissed that application on the ground that the lease was only a stopgap arrangement and that it was for the Receiver to make a fresh arrangement for the future under the supervision and directions of the Civil Judge under whose preliminary decree he derived authority. It is manifest from the aforesaid orders that the Receiver was put in possession of the entire property of the defen-dants, that he was not empowered to run the mills personally, that by subsequent orders he was directed to lease out the mills to the parties in the manner prescribed and that under the final order he was to take over possession and make other arrangements for running the mills. In the premises, we find it very difficult to accept the argument of learned counsel that the Receiver was not put in possession of the mills, but the mills continued to be in the possession of tile defendants. We hold on a construction of the relevant orders that the flour mill of the appellant was also put in the possession of the Receiver and that the appellant was running the said mill under the compromise formula.

The second contention of learned counsel for the appellant is that the Receiver appointed in the suit ceased to be a Receiver qua the rights of the parties when the final decree was made by the Court. This contention leads us to the consideration of the question whether a Receiver appointed in a suit ceases to be such automatically on the termination of the suit. Neither s. 51(d) nor Order XL of the Code of Civil Procedure prescribes for the termination of the office of receivership.. We must, therefore, look for the solution elsewhere. Some of the authoritative text-books on receivers may usefully be consulted in this connection. In Halsbury's Laws of England, 3^rd edn., Vol. 32 (Lord Simonds), at p. 386 under the heading "Duration of appointment by court", the following statement occurs:

"When a receiver is appointed for a limited

time, as in the case of interim orders, his

office determines on the expiration of that

time without any

further order of the court, and if the

appointment is until judgment or further

order' it is brought to an end by the judgment

in the action. The judgment may provide for

the continuance of the receiver, but this is

regarded as a now appointment. If a further

order of the court, though silent as to the

receivership, is inconsistent with a

continuance of the receiver, it may operate as

a discharge.

When a receiver has been appointed on an

interlocutory application without any limit of

time, it is not necessary to provide for the

continuance of his appointment in the final

judgment. The silence of the judgment does

not operate as a discharge of the receiver or

determination of his powers. So, also the

appointment of a receiver generally by the

judgment in an administration action need not

be continued by the order on further

consideration."

In Kerr on Receivers, 12^th edn., in chapter XII under the heading "Discharge of a Receiver", the legal position is explained thus:

"The appointment of a receiver made previously

to the judgment in an action will not be

superseded by it, unless the receiver is

appointed only until judgment or further

order."

In High on the Law of Receivers, 4^th edn., the following observations appear at p. 985: ,

"The functions of a receiver usually terminate

with the termination of the litigation in

which he was appointed. And when the bill

upon which the appointment was made is

afterwards dismissed upon demurrer, the duties

of the receiver cease as between the parties

to the action……….. And although as

between the parties to the litigation his

functions have terminated with the

determination of the suit, he is still

amenable to the court as its officer until he

has complied with its directions as to th e

disposal of the funds which he has received

during the course of his

receivership………….. But an order of

discharge does not necessarily follow, in all.

cases, because of the determination of the

suit, and the court may, upon sufficient cause

shown,

either discharge or continue the receiver,

according to the exigencies of the case."

The learned author makes a further distinction at p. 986 between the following two classes of cases:

"Since the final decree in the cause is

generally decisive of the subject-matter in

controversy, and determines the right to the

possession of the fund or property held by the

receiver, it is usually the case that such

decree supersedes the functions of the

receiver, since there is then nothing further

for him to act upon, although it would seem to

be still necessary that a formal application

be made for his discharge. But when the court

by its decree does not attempt to decide the

main question in controversy, and leaves the

receiver's possession undisturbed, it cannot

be held to have the effect of operating as a

discharge, or of superseding his functions."

Woodroffe in "The Law relating to Receivers in British India", 4^th edn., states at p. 22 thus:

O. XL, r. 1(a) now expressly provides that a

receiver may be appointed whether before or

after decree. As long as the order appointing

a receiver remains unreversed, and as long as

the suit remains a lis pendens, the functions

of the receiver continue, until he is

discharged by order of the Court."

The law may briefly be stated thus: (1) If a receiver is appointed in a suit until judgment, the appointment is brought to an end by the judgment in /the action. (2) If a receiver is appointed in a suit, with. out his tenure being expressly defined, he will continue to be receiver till he is discharged. (3) But, after the final disposal of the suit as between the parties to the litigation, the receiver's functions are usually terminated, he would still be answerable to the court as its officer till he is finally discharged.. (4) The court has ample power to continue the receiver even after the final decree if the exigencies of the case so require.

Let us now apply the said principles to the facts of the instant case. The order appointing the Receivers

III did not expressly state that the Receivers' term would expire on the termination of the suit. Under the preliminary decree the plaintiff became entitled to apply for the passing of the final decree for the sale of the property charged and also to get a personal decree against the defendants 1^st set and 2^nd set for the balance of his claim remaining due after the sale The preliminary decree expressly directed the Receivers to continue until discharged. Pursuant to the preliminary decree, a final decree for sale of the said properties was made, but the said decree did not in any way modify the direction given in the preliminary decree in respect of the Receivers. The combined effect of the two decrees is that the final decree did not terminate the suit, for the plaintiff would still be entitled to get a personal decree in case the sale proceeds were not sufficient to pay off his dues. It cannot, therefore, be said that the suit has be finally an disposed of. That apart, the preliminary decree in express terms directed the Receivers to continue till they were discharged. In the circumstances, we are definitely of the opinion that the Receivers continued by the preliminary decree are entitled to function in that capacity till they are discharged.

The third contention of learned counsel for the appellant raises the question whether in the circumstances of this case the Receiver could recover possession from the appellant only by instituting a regular suit against him for eviction. The facts germane to this contention may be briefly recapitulated. On January 14, 1956, the appellant executed a lease deed in respect of the flour mill in favour of the Receiver and there was an express recital therein that the lessee would deliver possession to the Receiver of all the demised premises upon the expiry of the term of lease. The said lease was executed as a part of a com-promise scheme for running the mills. The term of the lease had expired. Thereafter the court directed the Receiver to take possession of the property and auction the same to the highest bidder. The question is whether under the circumstances a court can dispossess the appellant under, a summary process or

whether it could only do so by directing the

Receiver to file a suit for eviction. The

material provisions of Order XL of the Code of

Civil Procedure read:

Rule 1. (1) Where it appears to the Court to

be just and convenient, the Court may by

order-