RAJAGOPALA VENKATA NARASIMHA Vs. VENKATALINGAM

JUDGEMENT

(1.) We will deal with these appeals in a common judgment, separating them however as convenient.

(2.) A.A.O. Nos. 411 and 412 of 1942. - The appellant is. the decree-holder and the respondent is the judgment-debtor, defendant 24 in O.S. No. 86 of 1916, Sub-Judge's Court, Chittoor, which was a suit by a junior member of the Kalahasti Zamindari for maintenance against defendant 24. On 6 June 1918, there was a preliminary decree for Rs. 42,658-15-6 which was charged on the whole of the zamindari. In this appeal we are concerned with the sale of Peddakannali village, part of the zamindari. On 23 November 1920, the final decree was passed. Appeals Nos. 58, 69 and 70 of 1919 were filed by various defendants against the preliminary decree. These appeals were dismissed on 3 May 1927. E.P. No. 20 of 1930 was filed on 15 January 1930 and an order for sale of Peddakannali village was made on 28th March 1935. On 17 March 1934 one Srinivasa Ayyah was appointed receiver in a suit, O.S. No. 881 of 1914, which had been filed by one Simhachellarn. Srinivasa Ayyah was discharged in February 1936 and in the same month Simhachellam himself was appointed receiver. The sale proclamation regarding Peddakannali village was dated 30 September 1936. On 22nd January 1937 Simhachellam filed petitions for stopping the sale on the ground that he had been appointed receiver. This was dismissed on 1 March 1937. The sale was fixed for 26th January and on 21 January 1938 (Ex. D-20), the District Judge of Chittoor granted leave to proceed against Peddakannali village provided it was found to be subject to a charge by the executing Court. Simhachellam was discharged from his receivership in November 1938 and on 19 July 1939 in O.S.. No. 105 of 1925 one Srinivasalu Chetty was appointed receiver by the District Court, Chittoor. The sale of Peddakannali village was actually held on 30th September 1939. It is well to refer to some other litigation relating to this village. E.A. No. 385 of 1939 was filed before the Subordinate Judge of Chittoor for setting aside the sale dated 30 September 1939. On 27 October 1939 the present respondent made this application and the learned Judge ordered him to furnish security and on his failure to do so the Court dismissed his application to set aside the sale. There was an appeal, A.A.O. No. 411 of 1940, before King and Happell JJ. The learned Judges on 18 December 1941 agree with lower Court's conclusion, but noticed that the appellant took the point that the sale was void in that it had been effected without the previous sanction of the District Judge of Chittoor which it was contended was necessary because the Receiver Srinivasalu Chetti. was then in possession. The learned Judges set aside the orders of the lower Court and remanded the petition for disposal on this point. An application dated 4 March 1941 was made to the District Judge of Chittoor, E.A. No. 10 of 1941 in E.P. No. 6 of 1939 in O.S. No. 105 of 1925 to validate the sale of the village which had taken place on 30 September 1939. The learned District Judge on 6 August 1941 passed the following order : "I have already passed orders on a similar petition. Peddakannali has been sold in execution. It was in possession of a receiver of this Court in execution of a decree, and this Court permitted it to be sold. But when it was actually sold that receiver had been discharged and another receiver was in possession in execution of another decree. I will not express any opinion on the question whether sale is valid or invalid on that account. That is a question for the Sub-Court to decide. I would only say that this Court has absolutely no objection to the sale of this village and must not be considered responsible for any tactics of its receiver. I do not consider that there has been any contempt of Court in this case at all." This order does not appear to have been brought to the notice of King and Happell JJ. We read this order as implying that the learned Judge intended to say that he did not approve of the tactics of the receiver and that, had leave been asked for, he would have granted it. We understand this to mean that he gave retrospective leave, if such a thing was possible, but that in any case he would not have set aside the sale unless bound by law to do so on the ground that it was void ab initio. Whether it was void, he left to the executing Court to decide, which, in fact, it was later, as we know, again directed to do by the order of King and Happell JJ. The executing Court has held that as the sale was without permission, it was invalid, by which we understand it to mean void, and that an invalid sale could not be validated by obtaining subsequent permission. We propose to say only this about the lower Court's judgment, the learned Judge refused to draw what he described as "nice distinctions," between the words "void" and "voidable," which of course is the very essence of the decision; yet in the conclusion of his judgment he states that it was clear that the "decree- holder was really aware of the law that an execution sale can be cancelled by the executing Court if it had been held without the previous sanction of the Court."

(3.) It has been argued before us that the sale of 30 September 1939 is void because at the time of the sale Srinivasalu Chetti was the receiver in O.S. No. 105 of 1925 and the leave of the Court in that suit had not been obtained and it is contended that the leave could not be given retrospectively and that for these reasons the sale is void and is of no effect. For the appellant it has been argued that the sale is not void but can be set aside at the discretion of the Court and that it is obvious that the learned District Judge intended to give the necessary leave and that this Court, now that the matter is before it, should not set it aside and that in the absence of its being set aside it should be treated as a valid sale. We may state at once that there is nothing in the circumstances of this case which suggests that any injustice has been done. The receiver was the respondent's own manager and must have been perfectly well aware of everything that was going on. The short point before us, therefore, is whether a sale of property in the possession of a receiver is void or voidable. If it is void, it must be set aside; if it is voidable that is, it can be set aside if the Court thinks fit, we will unhesitatingly refuse to do so and it will be treated as valid. The authorities seem to us to be entirely in favour of the appellant. The law is succinctly stated in Kerr on "Receivers," Edn. 10, p. 192, etc. One extract is enough, "When the Court has appointed a receiver and the receiver is in possession, his possession is the possession of the Court, and may not be disturbed without its leave. If anyone, whoever he be, disturbs the possession of the receiver, the Court holds that person guilty of a contempt of Court and liable to be imprisoned for the contempt ... But unless the receiver comes with clean hands he will not be granted an injunction to restrain any interference with him, for instance, by distress. . . ." An instance where the Court refused to interfere is to be found in Jarvis V/s. Islington Borough Council 73 Justice of the Peace (N. C.) 323. In that case although execution was being levied, Warrington J. refused to assist the receiver whatever the technical aspect of the matter might be. The learned Judge points out that relief by injunction was an equitable relief. It is well to bear in mind that the jurisdiction of the Court over a receiver is not fettered by statute. Order 40, Rule 1 empowers a Court to appoint a receiver and to control his actions. There is nothing in the order which restricts the Court's control in any particular manner. This is naturally so. A receiver is an officer representing the Court, his possession is the Court's possession, and it follows that a very wide discretion must be in the Court as to how it should deal with its own affairs. The decisions relating to suits and proceedings against an Official Assignee which depend upon the provision of a statute ( Section 17, Presidency Towns Insolvency Act) have no relation to a receiver. It was argued by the learned Counsel for the respondent that authority for the proposition that a sale in execution of property of which a receiver was in possession was void is to be found in the decision of the Calcutta High Court in Mrs. Levenia Ashton V/s. Madhatmoni ( 10) 14 C.W.N. 560. It appears to have been argued before the learned Judges that although execution against property in the custody of a receiver might amount to contempt, it did not necessarily affect the sale, a proposition which was negatived. "The general rule" says Mookerjee J., "is well settled that property in the hands of a receiver is exempt from judicial process, except of course to the extent permitted by the appointing Court." It is only necessary to observe that in this judgment the learned Judges throughout recognise that such a sale is liable to be set aside, which, as they point out, is the trend of the English and American cases, and nowhere in this decision is it stated that such a sale is void. Another argument in favour of that view has been founded on the use of the word "illegal" in the judgment. We consider that the word is used by the learned Judge in a general sense-certainly not as meaning "void." Later decisions of the Calcutta High Court point out that the Calcutta view is that a sale of property in the possession of a receiver is voidable and not void, Karimunnissa V/s. Fazlal . In Kanalal V/s. Manoo Bibi ( 19) 6 A.I.R. 1919 Cal. 269 at p. 270, Mookerjee and Beachcroft JJ. observe : "As pointed out in Mrs. Levenia Ashton V/s. Madhatmoni ( 10) 11 C.L.J. 489 property in the hands of a receiver is exempt from judicial process and the purchaser of such property at an execution sale buys at his peril for the sale may be cancelled upon an application to the execution Court." In other words, when property is in the custody of a receiver appointed by a Court, the sale under an execution issued by another Court may be avoided by appropriate procedure. It must be remembered in this case that execution was levied by the Subordinate Judge's Court of Chittoor in a case in which a receiver had been appointed by the District Judge. In Mangtulal V/s. Daya Shanker ( 36) 23 A.I.R. 1936 Pat. 572 at p. 576 where the Calcutta cases are discussed, Mohammad Noor and Rowland JJ. state that "a sale in execution of a decree of a property in the custody of a receiver without the leave of the Court which appointed him is not void but it can be set aside in a proper proceeding." In Thayumana Pillai V/s. Ramaswami Chettiar Krishnan and Odgers JJ. approve the statement of Mookerjee J. in Mrs. Levenia Ashton V/s. Madhatmoni ( 10) 11 C.L.J. 489 at p. 494 that a purchaser in court auction, without previous leave to sell, buys at his peril; for the sale may be cancelled. In a recent decision of the Madras High Court in Subramania Iyer v. Thandavamurti Chetti ( 42) 29 A.I.R. 1942 Mad. 670, Leach C.J. and Byers J. consider the Calcutta cases and the decision of the Madras High Court in Fraser and Ross V/s. Krishnaswami Iyer ( 23) 10 A.I.R 1923 Mad. 144. The learned Judges observe regarding the Calcutta case : "In the first of these oases, Mrs. Levenia Ashton V/s. Madhatmoni ( 10) 11 C.L.J. 489, the Calcutta High Court held that the sale of a foreclosure decree without the leave of the Court while the estate was in the possession of a receiver was illegal and liable to be avoided. That case is no authority for the proposition that the decree of the City Civil Court passed in favour of the appellant is a nullity. Whether it could be set aside at the instance of the official trustee as such or the receiver is, of course, another matter," The decree in question created a charge on property in the hands of a receiver. It would seem therefore that so far from there being any authority for the view that a sale of property in the hands of a receiver without leave of the Court is void, there is ample authority for the proposition that it is not void but is liable to be set aside, that is to say, is voidable. The sale therefore in the case before us was in the later category. The question is, should it now be set aside?