# HIRALAL PATNI v. LOONKARAM SETHIYA & OTHERS

- **Citation:** [1962] 1 S.C.R. 868
- **Court:** Supreme Court of India
- **Decided:** 1960-10-14
- **Case number:** Civil Appeal No. llO of 1961
- **Bench:** K. Subba Rao, Raghubar Dayal, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hiralal-patni-v-loonkaram-sethiya-others-2101
- **Pages:** 19

## Headnote

Civil Procedure-Receiver, continued by preliminary decree
till discharged-Final decree silent-Whether receiver automatically
discharged-Lease by reuiver to party-Term of leas. expiringDispossession o/ lessee by receiver-,Summary procedure or civil
suit-Code of Civil Procedure, I9D8 (V of 1908), 0. 40.
The John Mills comprising of three textile mills and one
flour mill were jointly owned by several persons. The financier
of the Mills filed a snit for recovery of the amount due to him.
During the pendency of the suit a receiver was appointed to
take possession of the flour mills but he was not empowered to
run the mi!ls directly without further directions of the court.
A preliminary decree was passed in the suit directing among
other things that the receiver was to continue until discharged.
Thereafter, an arrangement was made for running the mills and
the court directed that the appellant, who was one of the coowners of the mills, he given a lease of the flour mill for three
years by the receiver. In the lease deed the appellant undertook to deliver back possession to the receiver upon the expiry
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1 S.C.R. SUPREME COURT REPORTS
869
of the three years. Shortly thereafter, a final decree was passed
in the suit but it was silent in regard to the receiver appointed
•earlier. On the expiry of the three year term of the lease the
court directed the receiver to take back possession of the flour
mill from the appellant. The appellant contended (i) that after
the passing of the final decree the receiver ceased to '.be a
receiver in respect of the rights of the co-owners and could not
dispossess the appellant, and (ii) that the appellant could only
be dispossessed by a suit filed by the receiver and not by a
summary procedure.
Held, that the receiver continued by the preliminary decree
was entitled to function till he was discharged. The legal position with regard to the continuance of receivers is that: (i) if a
receiver is appointed in a suit until judgment, the appointment
is brought to an end by the judgment in the suit; (ii) if a receiver is appointed in a suit without his tenure being expressly
defined, he will continue till he is discharged; (iii) even after
the final disposal of the suit, though as between the parties to
the suit his functions are usually terminated, the receiver continues to be answerable to the court till he is finally discharged,
and (iv) the court has ample power to continue the receiver
even after the final decree if the exigencies of the case so
require. The final decree in the present case did not finally
dispose of the suit and did not bring the appointment of the
receiver to an end.
Held, further that the court was entitled to direct the
appellant to give back possession of the flour mill to the receiver. The court was merely making suitable arrangement for
the running of the mill in the course of its administration of the
estate through the receiver. The mill had been leased out to the
appellant with an express condition that he should redeliver
the property to the receiver on the expiry of the lease and the
court was competent under 0. 40 r. I(r)(d) Code of Civil Procedure to confer a power on the receiver ,to recover the pro~
perty from the appellant. It was not necessary for the receiver
to file a suit for the recovery of the property.

## Text

_Characters 0–39,874 of 41,676. This is a partial read: ask again with offset=39874 for what follows._

868
SUPREME COURT REPORTS
[1962)
r96r
under the Export Promotion Scheme and still the
Gia" Chatons State Trading Corporation had been :preferred it would
Importm &
perhaps have been necessary to consH,ler whether the
Usm' A"ociation preference accorded to the Corporation was based on
v.
reasonable and rational grounds. It is clear however
Union of India that though it was open to these petitioners to apply
for licenqes uuder the Export Promotion Scheme they
Das Gupta J. made no application for licence thereunder. There is
no scope therefore for the argument that they have
been discriminated against.
April II·
In the result, we are of opinion that the petitioners
are not entitled to any relief under Art. 32 of the Constitution. The petition is accordingly dismissed with
costs.
Petition dismissed.
HIRALAL PATNI
v.
LOONKARAM SETHIYA & OTHERS
(K. SUBBA RAO, RAGHUBAR DAYAL and
J. R. MUDHOLKAR, JJ.)
Civil Procedure-Receiver, continued by preliminary decree
till discharged-Final decree silent-Whether receiver automatically
discharged-Lease by reuiver to party-Term of leas. expiringDispossession o/ lessee by receiver-,Summary procedure or civil
suit-Code of Civil Procedure, I9D8 (V of 1908), 0. 40.
The John Mills comprising of three textile mills and one
flour mill were jointly owned by several persons. The financier
of the Mills filed a snit for recovery of the amount due to him.
During the pendency of the suit a receiver was appointed to
take possession of the flour mills but he was not empowered to
run the mi!ls directly without further directions of the court.
A preliminary decree was passed in the suit directing among
other things that the receiver was to continue until discharged.
Thereafter, an arrangement was made for running the mills and
the court directed that the appellant, who was one of the coowners of the mills, he given a lease of the flour mill for three
years by the receiver. In the lease deed the appellant undertook to deliver back possession to the receiver upon the expiry
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1 S.C.R. SUPREME COURT REPORTS
869
of the three years. Shortly thereafter, a final decree was passed
in the suit but it was silent in regard to the receiver appointed
•earlier. On the expiry of the three year term of the lease the
court directed the receiver to take back possession of the flour
mill from the appellant. The appellant contended (i) that after
the passing of the final decree the receiver ceased to '.be a
receiver in respect of the rights of the co-owners and could not
dispossess the appellant, and (ii) that the appellant could only
be dispossessed by a suit filed by the receiver and not by a
summary procedure.
Held, that the receiver continued by the preliminary decree
was entitled to function till he was discharged. The legal position with regard to the continuance of receivers is that: (i) if a
receiver is appointed in a suit until judgment, the appointment
is brought to an end by the judgment in the suit; (ii) if a receiver is appointed in a suit without his tenure being expressly
defined, he will continue till he is discharged; (iii) even after
the final disposal of the suit, though as between the parties to
the suit his functions are usually terminated, the receiver continues to be answerable to the court till he is finally discharged,
and (iv) the court has ample power to continue the receiver
even after the final decree if the exigencies of the case so
require. The final decree in the present case did not finally
dispose of the suit and did not bring the appointment of the
receiver to an end.
Held, further that the court was entitled to direct the
appellant to give back possession of the flour mill to the receiver. The court was merely making suitable arrangement for
the running of the mill in the course of its administration of the
estate through the receiver. The mill had been leased out to the
appellant with an express condition that he should redeliver
the property to the receiver on the expiry of the lease and the
court was competent under 0. 40 r. I(r)(d) Code of Civil Procedure to confer a power on the receiver ,to recover the pro~
perty from the appellant. It was not necessary for the receiver
to file a suit for the recovery of the property.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
llO 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. R. Choudhuri, A. K. Kirty and Ratna Rao, for
respondent No. I.
•
Hiralal Patni
v.
Loonkaram
Sethiya
I96I
Hiralal Patni
v.
Loonkaram
Setkiya
870
SUPREME COURT REPORTS
'
[1962]
S. P. Sinha and M. I. Khawaja, for respondents
Nos. 2, 3 and 4.
H. N. Sanyal, Additional Solicitor-General of India'
and G. O. 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.
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 procedings were initiated, other
persons had acquired interest therein.
The following
persons were the joint owners of th'e mills: (1) Hiralal
Patni, the appellant, and Munni Lal Mehra ... 19/40th
share; (2) Gambhirmal Pandiya Private Ltd .... 8/40th
share; (3) Messrs. John & Co .... 11/40th share; and
(4) I.E. John ... 2/40th 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 Sothiya 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 1st set", and
the partners of Messrs. Johns Jain & Co., who were
for convenience described as "defendants 2nd set",
were made parties. Pending the suit, the said Sethiya
filed an application under 0. XL, r. 1, Code of Civil
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1 S.0.R. SUPREME COURT REPORTS
S71
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 Pa tni 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 Mehra
& 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 Receivers 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 an 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 Receivers appointed
by the learned Civil Judge, and appointed another
Receiver in their place. On March 25, 1955, the
learne!l Ci vii 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 terms 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
I96I
Hiralal Patni
v.
Loonkaram
Sethiya
Subba Rao ].
•
Hiralal Patni
v.
Loonkaram
Sethiya
Subba Rao ].
•
872
SUPREM:E! COURT REPORTS
,[1962]
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 d11cree, 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 tht( 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
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1 S.C.R. SUPREME COURT REPORTS
873
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 is
not necessary to con11ider 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 moveable, of the defendants 1st set for its protection and
preservation. The order of the High Court described
the John family as defendants 1st set to the suit, and
defendant 5, Hiralal Patni, defendant 6, Munnilal
Mehra, and Messrs.
John Jain Mehra & Co. as
defendants 2nd set. This order was confined only to
the properties of defendants 1st set. The High Court
further proceeded to state:
"In the finance agreement in plaintiff's favour,
the plaintiff was uot 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 Ci vii 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:
IIO
I96I
Hiralal Patni
v.
Loonkara1n
Sethiya
Subba Rao ].
Hiralal Patni
v.
Loonkaram
Sethiya
Subba Rao ].
874
St:tPRlllME COURT RlllPORTS
[1962]
"We have already set out the circumstances
which in our opinion make it neces8ary 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 noi interfere with the
rnnning of the mills except nnder 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 directions."
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
1st 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 belong- •
ing to the 2nd 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 1st set in the mills.
'Vhatever terminology may have been used, the fact remains that the
Receivers were put in charge of the entire property
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l S.C.R. SUPREME COURT REPORTS
875
of defendants 1st 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 2nd 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 II set, and I order that the present receivers
who are in possession of the defendant 1st set share
should also be appointed receivers over the share
of the defendant II 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 8th
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 1st 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
Hiralal Patni
v.
Loonkaram
Sethi ya
Subba Rao ].
196z
l-liralal I'atni
v.
Loonkaram
Sethiya
Subba Rao ].
876
SUPREME COURT REPORTS
[1962]
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 plaintiff's claim,
the plaintiff would get a personal decree against defendants 1st set and defendants 2nd 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 RE;ceivers
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 spin.ning 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
said 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 rel1d the relevant portions
thereof:
Clause 1. That the aforesaid parties have without prejudice to their rights and liLigaLion 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.
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1 S.C.R. SUPREME COURT REPORTS
877
I
(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 recei vcr
shall take possession of the Mills and with the permission 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 ~ere 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 Government, who were willing to run the mills.
This order
r961
Hiralal Patni
v.
Loonkaram
Sethi ya
Subba Rao ].
Hiralal Patni
v.
Loonkaram
Sethiya
Subba Rao ].
878
SUPREME COURT REPORTS
[1962]
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 under 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
y
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 ear.lier 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
appella.nt got possession from the Receiver and agreed
"To yield up all the demised premises with all fixtur.e,
~ '·
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
;
. 1 S.C.R. SUPREME COURT REPORTS
879
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 H.eceiver 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 defendants, 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 !llinner
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!earned counsel that
the Receiver was not put in possession of the mills,
but the mills continued to be in the possession of the
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. 5l(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, 3rd 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
,
Hiralal Patni
v.
Loonkaram
Sethiya
Subba Rao ].
•
z96r
I-liralal Patni
v
Loonkaratn
Sethiya
SulilHt Nao ].
880
SUPRE;ME COUR'l' REPORTS
(1962]
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 tho action. The judgment may provide for the continuance of the receiver, but this is regarded as a new 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, 12th 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, 4th 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 the 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,
,
., ..
•
\
)
I S.C.R. SUPREME COURT REPORTS
881
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", 4th edn., states at p. 22 thus:
"0. XL, r. l{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, without 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
Ill
HiYalal Patni
v.
Loonkara;n
Sethiya
Subba Rao ].
I96I
lliralal Patni
v.
Loonkatam
Sethiya
Subba Rao ].
882
SUPREME COURT REPORTS
[1962]
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 1st set and 2nd 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 snit, 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 been finally
disposed of.
That apart, the preliminary decree in
express terms directed the Receivers to continue till
they were discharged. In the circumstances, "\le 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 fjj,cover 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 compromise scheme for running the mills. The term of
the lease had expired. Thereafter the court directed
the Receiver to take posses)lion 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
'
I
•
)
1 S.C.R.
SUPREME COURT REPORTS
883
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) 'Vhere it appears to the Court to be just
and convenient, the Court may by order-
·····································································
(b) remove any person from the possession or
custody of the property;
·····································································
(d) confer upon the receiver all such powers, as to
bringing and defending suits and for the realization, management, protection, preservation and
improvement· of the property, the collection of the
rents and profits thereof, .........
(2) Nothing in this rule shall authorize the Court
to remove from the possession or custody of property any person whom any party to the suit has
not a present right so to remove.
Under this Order, a receiver is an officer or representative of the court and he functions under its directions. The court may, for the purpose of enabling
the receiver to take possession and administer the
property, by order, remove any person from
the
possession or custody of the property. Sub-r. (2) of
rule 1 of the Order limits that power in the case of a
person who is not a party to the suit, if the plaintiff
has not a present right to remove him. But when a
person is a party to the suit, the court can direct the
receiver to remove him from the possession of the property even if the plaintiff has not a present right to
remove him. In the present case, the appellant was
a party to the suit and the court, through the Receiver took possession of the mill and thereafter the
Receiver, during the course of the administration of
the property, under a compromise arrangement for
running the mills, leased o.ut the flour mill to the
appellant with an express condition that the appellant should redeliver the property to the Receiver on
the expiry of the lease. Admittedly the term of the
lease had expired, and the court directed the Receiver
to take possession of the mill. The court, in our view,
Hiralal 'Patni
v.
Loonkaram
Sethi ya
Subba Rao ].
Hiralal Patni
v.
Loonkaram
SeJhiya
Subba Rao j.
884
SUPREME COURT REPORTS
[1962)
was legally competent to confer a power on the Receiver under Urder XL, r. l(l)(d), of the Code of Civil
Procedure to recover the property from the appellant.
The decisions cited at the Bar are not of much
relevance to the present case. Krista Chandra Ghose
v. Krista Sakha Ghose (1) is a case where a lease was
granted by a Receiver acting under an order of court
and the possession of the property had been given to
the lessee, and subsequently certain parties applied to
the court for a declaration that the lease was invalid
on the ground that it was obtained by collusion.
There the court held that no summary order could be
passed to set aside the lease and the proper remedy
would be by a suit against the Receiver and also
against the lessee. In that case the lessee, though he
was a party to the suit, acquired a leasehold right
under the lease deed and third parties, who offered a
higher rent, sought to question the lease on the
ground of collusion.
Woodroffe, J., held that the
dispute could only be decided in a properly instituted
suit. The Rajasthan High Court in Nanakchand v.
Pannalal (') held that a Receiver could not recover
the rent from a lessee in a summary order of the
court, but should file a suit just like any other landlord. The Allahabad High Court in Loonkaran v.
I. N. John('), though it conceded that where a lease
had been executed by the Receiver, the lessee may
ordinarily be evicted from the demised property only
by a regular suit, held that where after the expiry of
the term of the lease granted by a Receiver, the sublessee in possession gave an undertaking to the court
that he would vacate the premises in favour of the
prospective lessee if no fresh lease was granted in his
favour, the court has power to eject the sub-lessee in
its summary jurisdiction. The learned Judge observed at p. 59 thus:
"By givlng an undertaking to the court that he
would vacate the Mill in favour of the prospective
lessee and by bidding in the court-auction the
appellant, in our view, submitted himself to the
(1) (1908) l.L.R. 36 Cal. 5"
(2) A.I.R. 1951 Raj. 15z.
(3) A.I.R. 1961 All. 59.
l
I S.C.R. SUPREME COURT REPORTS
885
jurisdiction of the court. The appellant could there.
fore be ejected by summary process, instead of by a
suit."
So too, the High Court of Travancore-Cochin in Siva.
rajan v. Official Receiver, Quilon District (1) held that
where the period of the lease granted to the receiver
had already expired and as per th c express sti pulation in the lease deed the lessee was bound to surrender possession of the property without raising any
objection at all, the Court could summarily evict him.
The learned Judge made the followng observations at
p. 39:
"Even though the lease deed stands in favour of
the receiver the express undertaking given by the
lessee for an unconditional surrender of the property is in favour of the court.
.. .... The summary
enforcement of the undertaking thus taken by the
court is only a step towards the discharge of the
duties of the court in the management of the estate
and it cannot be said that the court has lost its
jurisdiction in that direction merely because the
property has been in the possession of a lessee."
Further -citation would be redundant.
These and
such decisions seem to hold that a court cannot evict
a lessee from a receiver, whether he is a party to the
suit or not, in exercise of its summary jurisdiction
unless the lease expressly conferred a right of re-entry
under the lease deed on the receiver. It is not necessary to demarcate the boundaries of the summary
jurisdiction of a court in managing an estate through
a receiver, for in this case we are clearly of the
opinion that the appellant was in possession of the
mill under an agreed and integrated scheme for running the mills by the different partners, though he
was put in possession under a document .described as
a lease deed. In effect the Receiver, during the
course of. the management, entrusted each mill to one
of the partners so that the mills might be properly
worked under experienced hands. The appellant expressly agreed to put the Receiver in possession of the
mill after the expiry of three years. No question of
(I) I.LR. I953 T.C.