RAI JATINDRA NATH CHOWDHURY Vs. SARFARAZ MEAH

JUDGEMENT

(1.) The question of law which has been argued in this appeal, is apparently one of first impression, so far as the Courts of this country are concerned, and relates to the right of a landlord to maintain an action for rent of a permanent tenure against his tenants, after a Receiver has been appointed by a Court of competent jurisdiction, in respect of the property over which the rent in arrears constitutes a first charge. The circumstances under which this question arises for decision, are not the subject of controversy between the parties. One Haniff Miah held a putni under the plaintiffs-appellants, created by an instrument dated the 21st November 1882. Haniff died in 1907, and left as his heirs, the eight persons who have been joined as defendants to this suit. On the 25 June 1908, the plaintiffs commenced the present action for recovery of the rents due from April 1905 to April 1908. The plaintiffs further prayed that a Receiver might be appointed to take charge of the defaulting tenure during the pendency of the litigation. Meanwhile, disputes had broken out amongst the members of the family of Haniff, and a suit for partition of the estate left by him had been commenced on the original side of this Court. In that suit a Receiver was appointed on the 17 August 1908, in respect of the entire estate of Haniff, inclusive of the defaulting tenure. The defendants in the present litigation, thereupon, intimated to the Court that the Receiver had been appointed and should be joined as a party defendant. The plaintiffs took time to consider their position, and ultimately declined to make the Receiver a defendant in the suit with the leave of this Court in the exercise of its original jurisdiction. The Court of first instance thereupon held that as the Receiver had furnished a security to the extent of Rs. 50,000 on the 29 August 1908, and had taken possession of the defaulting ten are he was a proper as well as a necessary party to this suit, because the plaintiffs not only asked for the appointment of a Receiver in their suit, but would also be entitled in execution of any decree made in their favour to enforce the same by sale of the defaulting tenure, which was in the custody of the Court. In this view, he dismissed the suit. Upon appeal the District Judge affirmed this decree. The plaintiffs have now appealed to this Court, and on their behalf, it has been argued that the Receiver is not a necessary party to the present litigation. In our opinion, this contention must be overruled in view of the scope of the suit and the effect of any decree therein that may be made in favour of the plaintiffs.

(2.) As has been already observed, the plaintiffs ask not merely for a decree for arrears of rent, but also for the appointment of a Receiver pendente lite. It cannot be disputed, further, that if the plaintiffs are successful in the suit, they will be entitled to bring the property to sale, and the purchaser will take it free from all encumbrances. Under such circumstances, the plaintiffs, as soon as they were apprised of the appointment of the Receiver by this Court, were, in our opinion, bound to make him a party to the suit, and to afford him an opportunity to resist their claims for the enforcement of what constitutes a first charge upon the property in his hands. It may be conceded that the appointment of a Receiver does not of itself debar a creditor of the person, over whose estate the Receiver is appointed, from pursuing his legal remedy by action against such debtor, or from bringing a suit for relief touching the same property, provided such suit does not in any way interfere with the possession or jurisdiction of the Court by which the receiver was appointed. The reason for the limitation is obvious, because no decree or judgment in such a suit can operate to disturb the custody of the Receiver, or be satisfied from the property in the hands of the Receiver, except through the administering assistance of the Court appointing him. The position, therefore, is, that the appointment of a Receiver does not affect the rights of a landlord, but before he can exercise them effectively, lie has to proceed against the Receiver, and for this purpose he must first obtain leave of the Court by which the Receiver was appointed. The proper course for the landlord under such circumstances, is to apply to the Court by which the Receiver has been appointed, for an order that the Receiver do pay the rent, or that the landlord be at liberty to proceed to enforce his rights according to law. The principle applicable to cases of this description was examined by Chancellor Walworth in Nose V/s. Gobison 7 Paige 513 and it was pointed out that if the contrary view were taken, rightful possession of the property by the Receiver might ultimately be interfered with, and no Court should tolerate a contempt of its authority by an attempt to deprive the Receiver of possession by force or even by a suit or other proceedings against him, without permission duly obtained. To the same effect is the decision in Martin V/s. Black 9 Paige 641 : 38 Am. Dec. 574. A similar point arose for consideration in the cases of Gooch V/s. Haworth 3 Beavan 428 and In re Battershy (1892) 31 L.R. Irish 73. In the first of these cases, it was ruled that where a landlord wishes to distrain for rent of property in possession of the Receiver, the Court if satisfied that the legal right of distress was paramount to the title of the party, for whose benefit the Receiver was appointed, would allow the distress to be made. In the second case, it was ruled that if leave is asked by a landlord to commence action for recovery of possession for non-payment of rent, the Court in disposing of such application will be slow to interfere with the rights of the landlord, and will only impose conditions, when necessary, for the benefit of the estate, and not likely to occasion the landlord any appreciable injury. To the same effect are the decisions in Sutton v. Bees 9 Jur. N.S. 456 : 8 L.T.N.S. 343 : 32 L.J. Ch. 437 : 11 W.R. 413 and Eyton V/s. Denbigh 38 L.J. Ch. 74 : 16 W.R. 928. These cases make it obvious that if the property is intended to be affected by the result of the litigation, the Receiver ought to be made a party to the suit by the landlord, and for this purpose, leave of the Court by which he was appointed should first be obtained. Property in the hands of a Receiver is in the custody of the Court; he is not liable to Suit in respect of such property in any Court, except that of which he is an officer, and a Receiver so appointed by Judicial authority, cannot be subject to suit except with the leave of the Court whose officer he is, granted in the case in which he was appointed. It follows, consequently, that a right asserted, against a Receiver, to property rightfully in his hands, must ordinarily be worked out either in the action in which the Receiver was appointed or in an independent action brought duly upon the leave of the Court by which the appointment was made. Searle V/s. Choat 25 Ch. D. 723 : 32 W.R. 397 : 53 L.J. Ch. 506; Angel V/s. Smith 9 Ves. 336 : 7 R.R. 214; Porter V/s. Savin 149 U.S. 473; Miller V/s. Ram Ranjan Chakravarti 10 C. 1014 and Barton v Barbour 104 U.S. 126. The object of the rule is to protect the estate in the hands of a Receiver from unnecessary and expensive litigation, to preserve it for the equal benefit of those equally interested in its distribution, and to keep the property at all times within the control of the Court, which cannot be done if the Receiver might be sued without its leave or perhaps without its knowledge, in any other Court or jurisdiction; much less can this object be gained, if decrees against the property were allowed to be passed without the knowledge and behind the back of the Receiver. In fact, as pointed out by this Court in the cases of Levenia Ashton V/s. Madhab Moni Dasi 5 Ind. Cas. 390 : C.W.N. 560 and Hem Chunder Chunder v. Prankristo Chunder I.C. 403 which was not followed on the original side of this Court in Jogendra Nath Gossain V/s. Debendra Nath Gossain 26 C. 127 : C.W.N. 90, if in execution of such a decree, the property is sold without notice to the Receiver the sale is liable to be cancelled upon a proper application to the execution Court. It is obvious, however, that the Receiver of the property of a party to litigation is not a necessary party, if no attempt is made thereby to interfere with the right of the Receiver to the property interested to his care. In illustration of this proposition reference may be made to the case of Janki Koer V/s. Sham Sivendra 10 C.L. J. 23 : 2 Ind. Cas. 958 where it was ruled that a Receiver appointed in the course of a mortgage suit, is not a necessary party to a suit by a creditor of the mortgagor, for the enforcement of a purely personal claim against him; but in an action to enforce a lien against a specific property in which a Receiver is interested, he should be made a party. This is well illustrated by the cases of Denny V/s. Gole (1900) 22 Washington 372 : 79 Am. St. Rep. 940 and Flynn V/s. Furth (1901) 25 Washington 105, 64 Pac. 904. In the first of these eases, it was pointed out that although a Receiver is in one sense the custodian of the property involved in the litigation in which he is appointed, he has such special property therein as to make him the representative of the rights of the parties in all actions or proceedings affecting the property; and in this character, he is entitled to notice in all cases in which the parties would have been entitled to be brought before the Court, had there been no Receiver. As was observed in Henning V/s. Raymond 34 C. 305 : 5 C.L.J. 270, the title to the property for the time being and for the purpose of administration and disposition, may, in one sense, be said to be in the Court; the Receiver is the right arm an the Court in exercising the jurisdiction invoked in such cases, and he is consequently entitled to be represented in a suit, the result of which may be to affect the property in, custodia leges; Jagat Tarini V/s. Naba Gopal Chaki 34 C. 305 : 5 C.L.J. 270. In the second ease, it was observed that although the Receiver is a proper and a necessary party, he ought not to be sued alone but ought to be joined as a defendant along with the parties who are primarily liable to satisfy the claim of the plaintiff, and upon whose liability, if any exists, a judgment must be finally entered See also the notes to Amercian Bank V/s. Mac Gettigale (1899) 7 Am. St. Rep. 352. It cannot be disputed that under such circumstances the Receiver is a proper party, and he may be admitted on his own application to appear end defend, if the interest which he represents renders it proper or necessary; and he is not only a proper but also a necessary party, by way of addition to and not substitution for the parties primarily responsible if the object of the suit is to affect a property lawfully in his charge. We must consequently hold in the present case that the Receiver ought to have been joined as a party defendant.

(3.) The learned Vakil for the appellants has suggested that, if in the opinion of the Court, the Receiver was a necessary party, the Court should have made an order for his joinder under Section 32 of the Code of 1882, which corresponds to Order 1 Rule 10, Sub-rule 2 of the Code of 1508. In our opinion, the plaintiffs were deliberately in default, and the Court was not bound to assist them in the manner suggested. Besides, the Court could not of its own motion add the Receiver as a party defendant, when leave of this Court was essential. It has further been suggested on behalf of the plaintiffs, that leave of this Court could not have been obtained without some delay. This, in our opinion, is an idle excuse. The suit of the plaintiffs was instituted nearly two years ago, and but for obstinancy on their part, the necessary leave might have been obtained and the Receiver added as a party long ago so as to remove all objections on the ground of defect of parties. It is, moreover, not improbable that if the Receiver had been apprised of the claim of the plaintiffs and if upon investigation he had found it to be just, he might have satisfied the claim from the assets in his hands. The plaintiffs are, therefore, solely to blame for the embarrassment in which they now found themselves. Bat as the objection taken in the Courts below was one of some novelty, and as a fresh suit, if now commenced, would be successfully met by the plea, of limitation as to a considerable portion of the claim, we think that the plaintiffs may well be allowed another opportunity to assert their rights; but this can be granted only by way of indulgence upon payment of all costs to the defendants. While, therefore, we hold that the view of the law taken by the Courts below, is correct, we direct that if the plaintiffs deposit in this Court within one month from this date, the costs incurred by the defendants, here, as well as in the Court of the District Judge, the appeal be allowed, the decrees of the Courts below be set aside and the suit be remanded to the Court of first instance to enable the plaintiff to take the necessary steps to have the Receiver added as a party defendant. If the costs are not deposited within the time allowed, the decree of the District Judge will stand confirmed, and this appeal will be dismissed with costs.