Andhra HC (Pre-Telangana)
Putta Venkata Chalapathi Rao vs Vysya Bank Ltd. And Anr. on 13 February, 2007
Equivalent citations: 2007(5)ALD92
ORDER P.S. Narayana, J.
1. Heard Sri Adinarayana, Counsel for the appellant and Ms. Karuna, Counsel for 1st respondent.
2. Sri Adinarayana, the learned Counsel representing the appellant had taken this Court through the impugned order and would maintain that the appointment of Receiver being a harsh remedy, the learned Judge totally erred in making such an order and hence the same is liable to be set aside. The learned Counsel also had taken this Court through the contents of the order.
3. Per contra, Ms. Karuna, the learned Counsel representing the 1st respondent would contend that the 1st respondent is the Vysya Bank Limited, Muppavaram, and taking into consideration the peculiar facts and circumstances the order was made and it being a just and reasonable order, the same need not be disturbed.
4. The 1st respondent, Vysya Bank Limited, Muppavaram, as Decree-holder filed E.P. No. 88/98 in O.S. No. 38/91 praying for appointment of a Receiver to take possession of the mortgaged property shown in the E.P. Schedule and to auction the leasehold interest therein from year to year with or without crops, as the case may be, and to deposit the said amount to the credit of the E.P. till the debt is fully realized under Order 41 Rule 1 of the Code of Civil Procedure, hereinafter in short referred to as "Code" for the purpose of convenience.
5. The 2nd judgment-debtor/2nd respondent in the present civil miscellaneous appeal remained ex parte. The appellant herein/1st judgment-debtor filed a counter taking a stand that the E.P. is not maintainable for appointment of a Receiver to take possession of the E.P. Schedule property and to put the leasehold rights to auction including the standing crop. Further stand had been taken that the E.P. Schedule property is mortgaged property and hence the decree-holder cannot bring the said property to sale to recover the amount and thus the remedy is not available to the 1st respondent/decree-holder.
6. The learned Senior Civil Judge, Addanki, framed the following point for consideration:
Whether the receiver can be appointed for conducting the auction of leasehold rights of the mortgaged property?
The learned Judge recorded reasons in paras 3, 4 and 5 of the order impugned and ultimately came to the conclusion that the application to be allowed and accordingly allowed the same. Aggrieved by the same, the present civil miscellaneous appeal had been preferred.
7. The 1st respondent/decree-holder obtained a preliminary decree against the appellant/1st judgment-debtor and the 2nd respondent/2nd judgment-debtor as well for an amount of Rs.75,165/- on 6-10-1994 with the date of redemption as 5-1-1995 and as the judgment-debtors failed to redeem the mortgaged property on or before the date specified supra, the 1st respondent herein/decree-holder filed a petition for passing of final decree and obtained the same on 26-6-1996 and as per the final decree the 1st respondent/decree-holder is entitled to bring the mortgaged property to sale.
8. Section 51 of the Code deals with Powers of Court to enforce execution. Section 51(d) of the Code specifies:
Subject to such conditions and limitations as may be prescribed, the Court may on the application of the Decree-holder order execution of the decree by appointing a receiver.
Likewise, Section 51(e) of the Code also specifies:
...in such manner as the nature of the relief granted may require.
It is needless to say that in the light of the aforesaid provisions of the Code, in execution of the decree, a Receiver may be appointed. However, the main contention advanced by the Counsel for appellant/1st judgment-debtor is that Order XL Rule 1 of the Code dealing with Appointment of receivers specifies "Where it appears to the Court to be just and convenient..."and would contend that in the facts and circumstances it is not just and convenient to appoint a Receiver.
9. In the present case, the 1st respondent/decree-holder-Bank already had obtained final decree on the strength of the preliminary decree and by virtue of the final decree, the 1st respondent/decree-holder is entitled to bring the mortgaged property to sale by way of public auction. It is needless to say that this relief which had been prayed for in a way would fall within the ambit of the said broader relief. In Pasumarthi Perraju and Ors. v. Central Bank of India AIR 1980 AP 283, while dealing with Order XL Rule 1 and Section 51 of the Code, a Division Bench held that the appointment of Receiver after mortgage decree for sale is permissible. The Division Bench in fact had referred to the decisions in Rudreshwari Pd. Sinha v. Ramabati Devi , Amarnath Ghose v. Abhoy Kumar AIR 1949 Pat. 24, Haragopal v. Deoniti Prasad Sing AIR 1945 Pat. 404, Subramanyam v. Ethirajulu AIR 1938 Mad. 325, Anandi Lal v. Ram Sarup AIR 1936 All. 495, Paramasivan v. Ramasami AIR 1933 Mad. 570 (FB), Ethirajulu Chetty v. Rajagopalachari Chettiar AIR 1929 Mad. 138, Vibhuda Priya v. Lakshmindra AIR 1927 PC 131, Sher Singh v. Devi Dayal (1913) 20 Ind. Cas. 761 and Hudson v. Morgan (1909) ILR 36 Cal. 713. A Full Bench of Bombay High Court in State Bank of India v. Trade Aid Paper and Allied Products (India) Pvt. Ltd. and Ors. , over-ruling the decision in B.D.A. Ltd. v. Central Bank of India , at paras 9 and 10 observed:
The suits instituted by Bank and financial institutions for realization of loans advanced to borrowers form a class by itself. The amounts advanced by the Nationalised Banks or the financial institutions are out of the funds deposited by common citizens and loans are advanced with a view to generate more employment and creation of additional wealth. Indeed, the amount is advanced with a view to further the cause of the country and surely not for the benefit of an individual. The Banks and the financial institutions secure the requisite documents and the borrower prior to obtaining loans executes deeds of mortgages and hypothecation of moveables including raw materials and book debts. The refusal to return the amount compels the Bank to institute suits and in case the interim relief is denied, the person who refuses to repay could continue to use the public money and make profits to the detriment of the financial institution. To hold that the Receiver should not be appointed unless it appears that sale proceeds of the properties secured or other securities are insufficient to satisfy the claim or Receiver should be appointed only in extreme cases and where the interest of the creditor is exposed to manifest peril would lead to serious prejudice. In the first instance, the value of the property or other securities as on the date of the suit is not likely to remain the same on the date of the judgment and which in this Court means more than 10 years. The assumption of Chief Justice in B.D.A. Limited's case (supra), that the value of the property would remain the same is erroneous because even if the injunction is granted restraining the defendants from alienating or encumbering the property, that would not prevent the preferential right of the Government or Corporation to bring the properties to sell for failure to pay income-tax dues or the property taxes. The apprehension of the financial institution that the properties are exposed to manifest peril when the defendant is committing default in repayment of the loan amounts is perfectly just and cannot be by-passed by suggesting that the property involved will not be dissipated or otherwise irreparable mischief may not be done by grant of injunction. The assumption of the Division Bench in B.D.A. Limited's case (supra), that the properties are not likely to be dissipated, wasted or otherwise seriously damaged or injured if receiver is not appointed is incorrect in most of the cases. The experience indicates that huge amounts are secured from banks and financial institutions and repayment is refused for no valid reason. The institution of the suit and the pendency of the suit enables the defendants to create more encumbrances on the properties and some of the encumbrances are like failure to pay income-tax, property taxes, provident fund dues of the employees etc. All these liabilities though subsequent to the date of the institution of the suit has a preferential claim of recovery and that leaves the Bank without any real relief after obtaining the judgment. It is, therefore, futile to suggest that the bank or the financial institution are not exposed to manifest peril. The effect of the observations of the Division Bench in B.D.A Limited"s case (supra), with respect, is to virtually rule out appointment of receiver in suits instituted by the Banks and the financial institutions and consequently, the decision is incorrect and is overruled.
As mentioned hereinabove, the decisions referred to in the judgment as regards the ambit of power of the Court to appoint Receiver under Order 40 Rule 1 of the Code of Civil Procedure were recorded in suits filed by the individuals to recover the loans or to enforce the mortgages. The economic policy of the Government and the Nationalised Banks has opened new vistas and requires the banks and the financial institutions to advance loans in many areas which were earlier unknown. The benefit available to the citizens of securing loans from Banks and financial institutions cannot be misused by refusal to repay the amount and then indulge in time consuming litigation. Indeed, it is the duty and function of the Court entertaining the suit instituted by Banks and financial institutions to ensure that efforts are made to dispose of the suits as eaR1y as possible and even during the pendency of the suits ensure that not only the properties are protected but the defendant is made to repay the amount, if desirous of enjoying the benefits secured by obtaining the loan. The powers of the Court under Order 40 Rule 1 of the Code of Civil Procedure are to be exercised to advance cause of justice and what is 'just and convenient' depends upon the nature of the claim and the surrounding circumstances. The Court should not close eyes to the realities and blindly follow the principles laid down 50 years before when the suits by Banks and financial institutions were a novelty. The economic liberalization and the policy of the Government to grant loans for various activities have increased the number of suits by Banks and financial institutions and in this Court every year more than 2000 suits are instituted. It would not be difficult to imagine how much public money is involved in these suits and how long the Nationalised Banks and financial institutions are deprived of their dues. The Court should be conscious of these facts and should be more pragmatic in exercising powers under Order 40 Rule 1 of the Code of Civil Procedure.
10. The learned Judge recorded reasons and ultimately was inclined to appoint Sri I. Venkata Rao, Advocate, as Receiver who was directed to take possession of the E.P. Schedule property and conduct auction of the leasehold rights by way of public auction and to deposit the proceeds to the credit of the E.P. till the decretal amount was fully realized. The 1st respondent/decree-holder had adopted this method instead of bringing the mortgaged property to sale in pursuance of the final decree. In the light of the reasons which has been recorded by the learned Judge and further in view of the fact that the power of the Court to make such appointment of Receiver in the facts and circumstances cannot be doubted in any way, this Court does not see any legal infirmity to interfere with the order made by the learned Judge.
11. Accordingly the impugned order is hereby confirmed and the civil miscellaneous appeal shall stand dismissed. In the facts and circumstances, the parties to bear their own costs.