AMARNATH GHOSE Vs. ABHOY KUMAR SINGH

JUDGEMENT

(1.) This appeal arises out of an interlocutory order made by the learned Additional Subordinate Judge of Bhagalpur appointing a receiver of mortgaged property in proceedings in execution of a final decree for sale. The mortgage deed was executed on 19 May 1930 as security for the repayment of a sum of Rs, 11,50,000. A suit was instituted early in 1986 for the recovery of Rs. 16,58,000 which was then the amount due on the mortgage. Although there was no real defence to the suit it was contested by the defendants, and it was not until 8th April 1940, that a preliminary decree was passed for Rs. 28,49,000. An appeal against this preliminary decree was preferred to this Court and was dismissed. The final decree was passed on 24 October 1944, for a sum of Rs. 29,71,000-and an application to levy execution on this decree was made to the Court below on 21st November 1944.

(2.) The plaintiffs in the mortgage suit were apparently from the outset, apprehensive that they would be unable to realise the whole of the money due to them, as immediately after its institution, they asked that the defendants should be required to furnish security to the extent of six lakhs of rupees and that in default their property should be attached before judgment. In resisting this application the defendants said that average annual income from the mortgaged property while it had been under the management of the Court of Wards, had been Rs. 1,09,651-11-0. Subsequently, it appears the defendants were assessed to agricultural income tax on the assumption that the annual income was somewhat more, namely, Rs. 1,19,053-7-0. The interest due on the mortgage is now Rs. 1,75,000 annually. It is true that a Bench of this Court has directed further enquiry to be made in order to ascertain if the property has not a considerable potential or postponed value. Admittedly, however, if. there are minerals on the property, no one, as yet, has thought it worthwhile to negotiate, for a prospecting licence, still less, has any mineral been actually worked commercially. As to the trees, the income from them in the past has been quite inconsiderable. I do not wish in any way to prejudice the enquiry that is now going on,, but I feel bound to say, that when the largest income which has in the past ever been derived from the property is insufficient to pay off more than about 70 per cent, of the interest which accrues annually on the mortgage debt, a strong prima facie case has been, made out that the security is now altogether insufficient, Under the order of the Court below, as it stands, the receiver is apparently to pay the land revenue and other charges on the mortgaged property and presumably his own commission and is then to retain the balance of the rents and profits until the mortgaged property is sold and the Court gives further directions as to how they are to be dealt with. The reason why the learned Additional Subordinate Judge made an order of this kind was that it was vehemently contended on behalf of the mortgagors that the security was not inadequate, that the rents and profits belonged to them and that they should be in a position to take them as soon as a sufficient portion of the property, had been sold. I am inclined myself to think that whenever a receiver is appointed at the instance of a simple mortgagee the order of appointment should direct him, after paying the land revenue and other charges on the mortgaged property and the interest, as it accrues due, on the mortgage of the mortgagee at whose instance he is appointed and the interest on the other mortgages which have priority over his and his own commission, to pay the balance to the mortgagor or such other person as may be entitled to it. The defect in the order made by the Court below is not, however, in this particular case of any practical importance, as it is conceded that the income to be derived from the property is insufficient to pay the interest accruing annually on the mortgage debt and it will, in any case, be open to the mortgagors to ask the Court below to direct the receiver to make payments to the mortgagee in reduction of the interest. Beaumont C.J. in Damodar Moreshwar Phadke V/s. Bai Radhabai A.I.R. (26) 1939 Bom. 54 thought it proper to allow the income to accumulate in the hands of the receiver until a sale took place. As the point was not argued before us and may not be altogether free from doubt I would refrain from modifying the Order in this quite minor particular.

(3.) Courtney-Terrell C.J. in Nrisingha Charan Nandy Ghaudhury V/s. Rajniti Prasad Singh A.I.R. 1932 Pat. 360 observed: The right of an equitable mortgagee to have a Receiver appointed is based on his right to be put by the Court into the position of a legal mortgagee. The same difference therefore between a simple mortgagee under Indian law and a legal mortgagee under English law exists between a simple mortgagee and an equitable mortgagee. and again: An equitable mortgagee although he cannot like a legal mortgagee take immediate possession, has a contractual right to be put by the Court into the position of a legal mortgagee and it is this fact which is the basis of his equitable right to the appointment of a Receiver.