Calcutta High Court
State Bank Of India vs Jayshree Ceramics Pvt. Ltd. And Ors. on 19 September, 1986
Equivalent citations: AIR1987CAL194, AIR 1987 CALCUTTA 194, (1987) BANKJ 454
JUDGMENT Sukumar Chakravarty, J.
1. The State Bank of India as the appellant-plaintiff in F.M.A.T. No. 614 of 1986 has filed this application for appointment of the Receiver in respect of the properties as mentioned in Schedules I to IV of the petition till the disposal of the aforesaid appeal with a prayer for ad interim appointment of the Receiver pending the hearing of the application for appointment of the Receiver.
2. The aforesaid P.M.A.T. No. 614 of 1986 has arisen out of order D/- 22-11-85 in the Mortgage Title Suit No. 47 of 1985 in the Court of the learned Assistant District Judge, Asansole, whereby the learned Assistant District Judge while issuing the notice upon the defendants of the suit in connection with the plaintiff's application for appointment of the Receiver, has rejected the plaintiff's prayer for ad interim appointment of the Receiver.
3. The Bench of this Court, presided over by Mr. Basak, J. and Mr. Das Ghosh, J. by its order dt 4-8-86 admitted the appeal and by its order of the same date with regard to plaintiff-appellant's application for appointment of the Receiver, gave the direction for hearing of the said application as the contested one and pending the hearing of that application an ad interim appointment of the Receiver was made ex parte, without giving any direction as to the Receiver's function.
4. As desired by both the parties, the appeal has also been heard along with the application for appointment of the Receiver till the disposal of the appeal, as the result of the application for appointment of the Receiver in the appeal will decide the fate of the appeal itself. Our preliminary suggestion to direct the lower court to expeditiously dispose of the application for appointment of the Receiver by disposing of the appeal accordingly without going into merits was not accepted by the appellant's learned Advocate who rather urged the court to dispose of the appeal and the application for appointment of the Receiver filed in the appeal on merits and, accordingly, we are doing so with our apprehension at the same time that our opinion on merits in the appeal and in the application under consideration may embarrass the lower court while disposing of the application for appointment of the Receiver.
5. The State Bank of India filed the aforesaid Mortgage Title Suit No. 47 of 1985 against Jayshree Ceramic Pvt. Ltd. and its Directors for recovery of the loan advanced to the Company in different accounts on mortgage, pledge and hypothecation of different kinds of properties, as the defendants did not pay the sum of Rs. 24,31,000/- and odds with interest up to April 1985, due to the plaintiff in spite of demands. The suit was filed in June, 1985. The application for appointment of the Receiver was filed in Nov. 1985 on the allegations, inter alia, that the defendant 1, Company, was endangering the securities by not paying the claims and that there was every likelihood of filing a petition for winding up of the unit of defendant No. 1 by any of the several creditors of the defendant 1 Company, that any of such creditor while filing a suit may get the securities attached before judgment and that the terms of the agreement in connection with credit facilities between the parties permit the plaintiff to ask for appointment of the Receiver in case of default in payment of the dues to the plaintiff.
6. The learned Assistant District Judge while issuing the notice for hearing the application for appointment of the Receiver rejected the prayer for ad interim appointment of the Receiver on the ground of delay in filing the petition for appointment of the Receiver and on the ground that no materials could be placed before the court showing any imminent danger to the securities by any attempt for disposal of the securities.
7. The application for appointment of the Receiver filed in the appeal concerned contains the similar ground as were taken in the petition for appointment of the Receiver in the lower court according to the submission on both sides. Nowhere in the petition filed in the appeal, it has been alleged that the defendant has expressed any intention to close the business for which the credit facilities were obtained and that the defendant was making any attempt or negotiation to dispose of or encumber the securities otherwise. It has not been disclosed in the petition also that any creditor of the defendant has expressed any intention or taken any steps to file any petition for winding up of the Company or that any creditor is taking any steps to file a suit against the defendant 1 and going to get the securities attached before judgment.
8. The principles which should guide the courts to the appointment of a Receiver are (i) that the plaintiff for appointment of the Receiver must show prima facie that he has strong case, or good title to the property or a special equity in his favour and that the property in the hands of the defendant is in danger of being wasted, (ii) where the property is in medio, that is to say, in the possession of no one, a Receiver can readily be appointed. But where any one is in possession under a legal claim, strong and compelling reasons are necessary for interfering with such possession (iii) An application for the appointment of the Receiver should always be made promptly and delay in making it is a circumstances unfavourable to such an appointment. The court while considering the question whether it will be just and convenient to appoint the Receiver must keep in mind the abovementioned principles. The decision in the case of Muniammal v. P.M. Ranganatha v. Ayengar, is relied on.
9. It has been laid down in the "Tagore Law Lectures 1897 Law relating to Receivers" by Sir John Woodroffe, 6th edition, that as regards the class of creditors "if a plaintiff-creditor had a right to be paid out of a particular fund, he could in equity obtain protection to prevent that fund from being dissipated so as to defeat his rights.............. If the real estates over which a Receiver is sought are on mortgage but the mortgagee is not in possession a Receiver will be appointed on the application of creditors without prejudice to the right of the mortgagee to take possession............... When the security contains a power to the mortgagee to appoint a Receiver the power can only be exercised in terms of the security, and if it is not exercised bona fide, the court will interfere and appoint its own Receiver."
10. Keeping in mind the above principles, we shall have to keep in view also that as in other suits in the mortgage suit also, the test is whether it will be just and convenient to appoint a Receiver.
11. There is no dispute to the fact that the defendant No. 1 while obtaining the credit facilities mortgaged the scheduled immoveable properties, hypothecated the plant and machineries, and pledged the stock in trade etc. According to the plaintiff, the defendant 1 is a sick industry and is running the business at a loss as per the balance sheet up to 1982. The defendant 1 in the affidavit-in-opposition has admitted the total loss of Rs. 7,44,000/- and odds up to December, 1982 but denies that the circumstances have occurred endangering the securities. The admitted fact is that the defendant No. 1 defaulted in payment of interest according to the terms of the agreement. Mr. Mallick while drawing our attention to the decision in the case of Hardwarimull Dibichand v. Lalchmandas Purukchand reported in AIR 1919 Cal 860(2) has submitted that in a suit of this nature based on securities the Receiver should be appointed as a matter of course.
12. It has already been shown that there was delay in filing the application for appointment of the Receiver in the lower court and in this appellate Court, although the application for appointment of the ad interim receiver was filed in February 1986 it was moved only on 4-8-86. It has also been shown that the petition does not disclose any material to show that the securities are in imminent danger of being wasted or disposed of or are likely to be attached before judgment at the instance of any other third party creditor or the company is likely to be wound up. If there is any apprehension of such threat to the securities, the plaintiff can get the relief by way of injunction but the appointment of Receiver whose main function will be to take possession of the securities, is likely to stop the running of the business of the defendant 1 company, which may not be at all just and convenient in the present facts and circumstances when the defendant No. 1 is still running the business. It cannot be expected that the learned Advocate who has already been appointed the Receiver by the Court's order dt. 4-8-86, will have the expertise to run the business of the type which is being run by the defendant 1 with its experience and expertise. The appointment of any other person as the Receiver who has not the requisite expertise will only lead the business to close down to the detriment of the interest of not only the creditors like the plaintiff but also of so many employees. The matter would have been otherwise if the company (defendant 1) would have been defunct or would have stopped the functioning of the business. Mr. Mallick submits that the Receiver may be directed to take only symbolical possession of the securities after making inventories and allow the business to run. Such suggestion does not appear to be practicable. The Receiver will be officer of the court. The court does not consider it just and convenient to appoint the Receiver to function as such as suggested by Mr. Mallick. It will create confusion and complication which in no time would go to stop the sunning of the business. For protection of the securities, plaintiff may take recourse to other method in the form of injunction application for the purpose but the appointment of Receiver in this case where the defendant's business is running will not be just and convenient despite the provision in the agreement for credit facilities for appointment of the Receiver.
13. In view of what has been stated above, we find that the learned Assistant District Judge has rightly rejected the prayer for ad interim appointment of the Receiver. The appellant's application for appointment of the Receiver till the disposal of the appeal is rejected and the appeal is dismissed. And interim order of this Court appointing the Receiver stands vacated. The application for appointment of the Receiver pending in the court of learned Assistant District Judge be disposed of expeditiously without being influenced in any way by our judgment. Prayer for stay of operation of this order moved but rejected considering the facts and circumstances of the case.
Gobinda Chandra Chatterjee, J.
14. I agree.