# ' EVEREST COAL COMPANY (P) LTD v. STATE OF BIHAR & ORS

- **Citation:** [1978] 1 S.C.R. 571
- **Court:** Supreme Court of India
- **Decided:** 1977-09-29
- **Bench:** V. R. Krishna Iyer, ]Aswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/everest-coal-company-p-ltd-v-state-of-bihar-ors-7295
- **Pages:** 6

## Headnote

Civil Procedure Code (Act V of 1908), Order XL-Leave to
Receiver, whether a must-Principle behind obtaining prior leave of
which appointed the.Receiver before suing tile Receiver, explained.
571
sue
the
the court
The appellant-plaintiff entered into a contract' with the Receiver defendant
State relating to a coal mine which had come within his
Receivership in an
earlier suit.
While the appellant was working the mine under the contract, the
Receiver-defendant after obtaining the permission of the court which appointed
him but without notice to the appellant, cancelled the contract. The appellant
sued the Receiver in damages after giving notice u/s. 80 C.P.C., but without
taking the prior permission of the court which appointed the Receiver. Although
he failed to apply for leave of the court before suing the Receiver, he made up
for it by applying to the said court for permission to continue the
litigation
against the Receiver.
The application was rejected on the view that since
the
petitioner had already filed a suit without leave of the cour_t, the question
of
grant of permission to continue it did not arise.
A revision to the High Court
was dismissed in limine.
Allowing the appeal by special leave an~ granting leave to the appellant to
prosecute his suit against Receiver-respondent, the court,
HELD : ( 1) The principle that prior leave of the court which appointed the
Receiver is necessary before suing the Receiver is based on 'contempt' of court.
The rule is merely to prevent contempt. Leave obtained before the Lis terminates is a solvent of contempt. The infirmity does not bear upon the jurisdicA
B
c
D
tion of the trying court or the cause of action. It is perepheral. The propelty
E
bt:ing in custodia legis, the court's leave, liberally granted is needed. It is the
court appointing the' Receiver that can1 grant leave.
If a suit prosecuted without
such leave culminates in a decree, it is liable to be set nside. [575 B-E1
(2) When a court puts a Receiver in possession of property. the
property
comes under court custody, the Receiver being merely an officer or agent of the
court. Any obstruction or interference with the court's possession sounds
in
conten1pt of that court.
~Any legal action in respect of that property is in
a
sense such an interference and invites the contempt penalty of likely invalidation
F
of the suit or other proceedings.
But, if either before starting the
action or
during its continuance, the party takes the leave of the court, the sin: is absolved
and the proceeding may continue to a conclusion on the merits.
In the ordinary course, no court is so prestige-conscious that it will stand in the v.-·ay of a
legitimate legal proceeding for redressal
or
relief against its receiver unless
the action is totally meritless, frivolous or vexatious or olher\vise vitiated by any
sinister factor.
Grant of leave is the rule, refusal the exception.
After aU, the
court is not, in the usual run of cases, affected by a litigation which settles the
rights of parties and the Receiver represents neither party, being an officer of
G
the court. For this reason, ordinarily the court accords permission to sue. or to
continue. The jurisdiction to grant leave is undoubted and inherent, but not
based on black letter law in the sense of enacted la\v.
Any litigative disturbance of the court's possession without its permission amounts to contempt of its
authority; and the wages of contempt of court in this jurisdiction may well be
voidability of the whole proceeding.
Equally clearly, prior permission of the
.:ourt appointing the Receiver is not a condition precedent to the enforcement
of the cause of action.
Nor is it so grave a vice that later leave sought and got
H
before the decree has been passed will not purge it.
If, before the suit terrninat~, the· televant court is moved and perm'ission to sue or to prosecute further
is granted, the requirement of law is fulfilled.
Of course failure to secure such
leave till the end of the /is

## Text

'
EVEREST COAL COMPANY (P) LTD.
v.
STATE OF BIHAR & ORS.
September 29, 1977
[V. R. KRISHNA IYER AND ]ASWANT SINGH, JJ.]
Civil Procedure Code (Act V of 1908), Order XL-Leave to
Receiver, whether a must-Principle behind obtaining prior leave of
which appointed the.Receiver before suing tile Receiver, explained.
571
sue
the
the court
The appellant-plaintiff entered into a contract' with the Receiver defendant
State relating to a coal mine which had come within his
Receivership in an
earlier suit.
While the appellant was working the mine under the contract, the
Receiver-defendant after obtaining the permission of the court which appointed
him but without notice to the appellant, cancelled the contract. The appellant
sued the Receiver in damages after giving notice u/s. 80 C.P.C., but without
taking the prior permission of the court which appointed the Receiver. Although
he failed to apply for leave of the court before suing the Receiver, he made up
for it by applying to the said court for permission to continue the
litigation
against the Receiver.
The application was rejected on the view that since
the
petitioner had already filed a suit without leave of the cour_t, the question
of
grant of permission to continue it did not arise.
A revision to the High Court
was dismissed in limine.
Allowing the appeal by special leave an~ granting leave to the appellant to
prosecute his suit against Receiver-respondent, the court,
HELD : ( 1) The principle that prior leave of the court which appointed the
Receiver is necessary before suing the Receiver is based on 'contempt' of court.
The rule is merely to prevent contempt. Leave obtained before the Lis terminates is a solvent of contempt. The infirmity does not bear upon the jurisdicA
B
c
D
tion of the trying court or the cause of action. It is perepheral. The propelty
E
bt:ing in custodia legis, the court's leave, liberally granted is needed. It is the
court appointing the' Receiver that can1 grant leave.
If a suit prosecuted without
such leave culminates in a decree, it is liable to be set nside. [575 B-E1
(2) When a court puts a Receiver in possession of property. the
property
comes under court custody, the Receiver being merely an officer or agent of the
court. Any obstruction or interference with the court's possession sounds
in
conten1pt of that court.
~Any legal action in respect of that property is in
a
sense such an interference and invites the contempt penalty of likely invalidation
F
of the suit or other proceedings.
But, if either before starting the
action or
during its continuance, the party takes the leave of the court, the sin: is absolved
and the proceeding may continue to a conclusion on the merits.
In the ordinary course, no court is so prestige-conscious that it will stand in the v.-·ay of a
legitimate legal proceeding for redressal
or
relief against its receiver unless
the action is totally meritless, frivolous or vexatious or olher\vise vitiated by any
sinister factor.
Grant of leave is the rule, refusal the exception.
After aU, the
court is not, in the usual run of cases, affected by a litigation which settles the
rights of parties and the Receiver represents neither party, being an officer of
G
the court. For this reason, ordinarily the court accords permission to sue. or to
continue. The jurisdiction to grant leave is undoubted and inherent, but not
based on black letter law in the sense of enacted la\v.
Any litigative disturbance of the court's possession without its permission amounts to contempt of its
authority; and the wages of contempt of court in this jurisdiction may well be
voidability of the whole proceeding.
Equally clearly, prior permission of the
.:ourt appointing the Receiver is not a condition precedent to the enforcement
of the cause of action.
Nor is it so grave a vice that later leave sought and got
H
before the decree has been passed will not purge it.
If, before the suit terrninat~, the· televant court is moved and perm'ission to sue or to prosecute further
is granted, the requirement of law is fulfilled.
Of course failure to secure such
leave till the end of the /is may prove fatal. [573 E-H, 574 A]
A
B
572
SUPREME COURT REPORTS
(1978] ! S.C.R.
Pramatha Nath v. Keira Nath (1905) 32 Cal. 270; Jamshedji v. Husseinbhai
(1920) 44 Born. 908, 58 J.C. 411, over-ruled.
Banku Behari 15 Calcutta Weekly Notes 54, approved.
OBSERVATION :
Wh~n any pr~cee~ing comes bef~re. the court for adjudication it is desirable
t<;>• decide tI:e point instead of mystI~ying the situation by avoiding a clear-cut
disposal as 1n the present case.
A stitch in time saves nine. [573 D]
C!vIL APPELLATE JURISDICTION : Civil Appeal No. 2224 of 1977.
Appeal by Special Leave from the Judgment and Order dated
15-2-77 of the Patna High Court (Ranchi Bench) at Ranchi in Civil
Revision Appeal No. 24 of 1977.
C
H. R. Gokhale, and B. P. Singh for the Appellant.
D
E
F
G
H
U. P. Singh and S. N. !ha for the Respondent No. l.
The Judgment of the Court was delivered by
~RISHNA IYE.R, J. This appeal, where we have granted leave, can
be drnposed of nght away, now that we have heard brief submission!
from both sides.
The facts are few, the issue is single and the solution simple; but to silence conflicting voices from different High Courts
and to clarify the law for the sake of certainty, we have chosen to
make a short speaking order.
The neat little legal point that arises is
this : Can the court appointing a receiver to take charge of properties, grant leave to continue a suit against him when a third party wants
to prosecute such action initiated without such permission?
Jf so,
what are the guidelines for grant of such leave ?
The appellant is the plaintiff in a suit instituted by him against
respondent I (defendant in the suit) who is a receiver appointed by
the court under 0.40, r. 1 C.P.C.
Briefly set out, the case of the
plaintiff is that he had entered into a contract with the Receiverdefendant relating to a coal mine which had come within his Receivership.
While he was working the mine
under
the
contract,
the
Receiver-defendant, after obtaining the permission of the court which
appointed him, but without notice to the plaintiff-appellant, cancelled
the contract wrongfully-such is his case.
Thereupon, the appellant
sued the Receiver in damages after giving notice under s. 80 CPC.
However, he somehow failed to move the court for cancelling the earlier
order passed to his prejudice in which case perhaps the court mi0it
have reconsidered the order and issued directions to his Receiver. We
are not concerned with that aspect of the case and we do not propose
to make any speculative observations thereon.
Althongh the plaintiff-appellant omitted to get leave from the court before suing the
Receiver, he made up for it, on second thoughts, by aP'JJlying to the
Court for permission to continue the -litigation against the Recei'<\'r.
When that proceeding came .up for hearin11: the learned SUbordinate
Judge dismissed it on the view that since the petitioner had already
filed' a suit without leave of the court, the question of grant of permis'
sion to continue it did not arise.
The court's observations which we
·
) v
EVEREST COAL co. v. BIHAR (Krishna Iyer, J.)
573
think are both unhelpful and erroneous and keeps the parties in suspense, are couched in these words :
"If the petitioner has already filed the suit without leave
of the court, he has already taken the risk and now the question does not arise for giving a fresh permission in the matter
of continuing the suit.
Because of the T.S. 74 of 1975
already instituted, the prayer for permission to continue the
same does not arise as it is infructuous ... Rejected.
A revision to the High Court did not improve matters because the
application was dismissed in limine, with the rather innocuously wise
statement :
"The law will have its own course and i_f in law the petitioner need not have taken the permission of the court for
continuance of the title suit, no observation made by the
learned Subordinate Judge can arm the petitioner."
A
B
c
In our view, when any proceeding comes before the court for
adjudication it is desirable to decide the point instead of mystyfying
D
the situation by avoiding a clear-cut disposal.
A stitch in time saves
nine.
The laconic affirmance by the High Court of
the trial court's
order has necessitated the appellant's challenge of its propriety and
legality.
Instead of leaving the matter 'astrologically'
vague and
futuristically fluid, we shall state the legal position and settle the
E
proposition governing this and similar situations. When a court puts
• a Receiver in possession of property, the property comes under court
custody, the Receiver being merely an officer or agent of the court.
Any obstruction or interference with the court's possession sounds in
contempt of that co.urt.
Any legal action in respect of that property
is in a sense such as interference and invites !he contempt penally of
likely invalidation of the suit or other proceedings.
But, if either
ll
before starting the action or during its continuance, the party takes
the leave of the court, the sin is absolved and the
proceeding may
continue to a conclusion on the merits.
In the ordinary course, no
court is so' prestige-conscious that it will stand in the way of a legitimate
legal proceeding for redressal or relief against its receiver unless the
action is totally meritless, frivolous or vexatious or otherwise vitiated
by any sinister factor.
Grant of leave is the rule, refusal the excepG
tion.
After all, the court is not, in the usual run of cases, affected by
a litigation which settles the rights of parties and the Receiver represents
neither party, being an officer of the court. For this reason, ordinarily the court accords permission to sue, or to continue.
The jurisdiction to grant leave is undoubted and inherent, b~! n~t bas.ed on blackletter law in the sense of enacted law.
Any ht1gattve disturbance of
the court's possession without its permission amou_nts t_o c?nt~mpt. of
H
its authority; and the wages of contempt of court m this 111nsd•rt1on
may well be voidability of the whole proceeding.
Equally
clear!~,
prior permission of the court appointing the Receiver is not a condition precedent to the enforcement of the cause of action.
Nor is it
A
B
574
SUPREME COURT REPORTS
[1978] 1 S.C.R.
so grave a vice that later leave sought and got before the decree has
been passed will not purge it.
If, before the suit terminates
the
relevant court is moved and permission to sue or to prosecute further
is granted, the requirement of law is fulfilled.
Of course, failure to
secure such leave till the end of the /is may prove fatal.
This, in short, is the law which has hoen stabilised by Indian deci- ·
si(ins although inherited from principles of English law.
In a sense
Indian, English and even American jurisprudence lend
support to
this law.
We now proceed to some citations, text-book-wise and precedentwise and indicating the conflict to eliminate which is the object of this
ruling.
C
Mulla, with characteristic clarity, has condensed the whole law
D
E
F
G
correctly :
"A receiver cannot sue or be sued except with the leave
of the Court by which he was appointed receiver.
A party
feeling aggrieved by the conduct of a receiver may seek redress against him in tbe very suit in which he was appointed
receiver, or he may bring a separate suit against the receiver
in which case he must obtain the leave of the court"
x
x
x
x
x
"There is no statutory prov1s10n which requires a party
to take the leave of the Court to sue a receiver.
The rule
has come down to us as a part of the rules of equity, binding upon all courts of Justice in this country.
It is a rule
based upon public policy which requires that when the Court
has assumed possession of a property in the interest of the
litigants before it, the authority of the Court is not to be
obstructed by suits designed to disturb the possession of the
Court.
The institution of such suits is in the eye of the law
a contempt of the authority of the Court, and therefore, the
party contemplating such a suit is required to take the leave
of the Court so as to absolve himself from that charge.
The
grant of such leave is made not in exercise of any power
conferred by statute, but in the exercise of
the inherent
power which every Court possesses to prevent acts which
constitute or are akin to an abuse of its authority."
x
x
x
x
x
"In Pramatha Nath v. Katra Nath
(1905)
32
Cal. 270
Bodilly J. held that the leave of the Court to sue a receiver
was a condition precedent to right to sue, and that if the
leave was not obtained before suit, it could not be granted
subsequent to the institution of the suit and the suit shou!rl
be dismissed.
This decision was dissented from in subseH
quent Calcutta cases where it was held that the leave may be
granted even after the institution of the suit.''
x
x
x
x
x
(
(
I
l
I
.I,, '
I
EVEREST COAL co. v. BIHAR (Krishna Iyer, 1.)
57 5
"Leave subsequently obtained at the time of realising
A
rents directly from the tenants will suffice.
In a Bombay
CljSe (Jamshedji v. Hussainbhai, 1920 44 Born. 908, 58 J.C.
411) Pratt, J., after an exhaustive review of the case-law on
the subject, came to the same conclusion; the learned judge
h<;ld that failure to obtain leave prior to the institution of
the suit was cured by subsequent leave."
B
(Mulla, Vol. II, pp. 1533-34, 13th Edn. CPC)
Since the principle is based on contempt of court, statutory followup actions are carved out as exceptions (suits uuder 0.21, 0.63).
Likewise, where no relief is claimed against the receiver.
Similarly,
whether the receiver was appointed in a collusive suit or the
order
itself was unjustified are beside the point. The property being in
C
custodia legis, the court's leave, liberally granted is needed.
It is
the court appointing the receiver that can grant leave. If a suit
prosecuted without such leave culminates in a decree it is liable to be
set aside.
Once the jurisprudential root of the law is grasped, that the rule
is merely to prevent contempt, the many problems proliferating from
D
the appointment of a receiver and legal proceedings against him without the appointing court's permission can be sorted out without converting the failure to get sanction before institution into a major, even
fussy issue.
Leave obfained before the lis terminates is a solvent of
the contempt.
The infirmity does not bear upon the jurisdiction of
the trying court or the cause of action. It is perepheral.
The extreme view taken in Pramatha Nath (ILR 32 Calcutta 270)
is not good law.
Banku Behari (15 CWN 54) a later ruling of the
same High Court, has struck the correct note :
"But we are unable to appreciate upon what intelligible
principle the position can be de.fended that because the suit
has been instituted without leave previously obtained it must
necessarily be dismissed, arid that it is not open to the Court
to stay proceedings in the suit with a view of enable the
Plaintiff to obtain leave of the Court to proceed with the suit
against the Receiver."
Bombay and Madras, Kerala and Mysore, have claimed in, some going
into long erudition, others readiif granting the position.
The standard
commentaries on the C.P.C. (Mulla as well as A.I.R.) concur in
this view, footnoting tbe flow of pan-Indian case-law.
The law in this branch, though based on Anglo-American thought,
has a legitimacy when viewed as contempt of the conrt's authority.
Once amends are made by later leave. being obtained, the gravamen
is gone and the suit can pr.ocee~. The pit)' is tJ:at sometimes
even
such points are expanded mto important
quest10ns
calculate~ to
protract Indian litigation already suffering from unhealthy longevity.
E
F
G
H
A
B
576
SUPREME COURT REPORTS
[1978] I s.c.R.
A pragmatic view, not theoretical perfection, is the corrective. The
leave should have been given.
We allow the appeal-in the hope· that such an objection may not
1'ecome a dilatory chapter in other litigations. We grant leave to the
appellant to prosecute his suit against the Receiver-respondent
The
parties will bear their· respective costs in this avoidable adventure, but
the respondent will be free to urge all his other contentions to meet
the plaintiff's claim.
S.R.
Appeal allowed.