HUDSON Vs. MORGAN

JUDGEMENT

(1.) We are invited in this appeal to discharge an order made by the Court below under Section 503 of the Civil P. C. of 1882, under which one of the respondents, the Receiver appointed in a mortgage suit, is authorized to take possession of properties in the custody of the appellant who is not a party to the mortgage suit, In order to appreciate the grounds upon which the propriety of the order is questioned, it is necessary to narrate the circumstances under which it has been made.

(2.) On the 29 June 1904, the appellant, Rowland Hudson, was, under a power-of-attorney executed by one of the respondents known as The Indian Development Company, appointed their attorney, and authorized to take possession of all property, moveable and immoveable, belonging to the latter and to superintend, manage, cultivate, carry on and conduct their estate and business in India. On the 4 October 1905, Hudson entered into an agreement with the Company, under which it was arranged that he would act as Managing Director for a term of five years from the 1 July 1905. The agreement provided that while either party might determine the same by giving twelve calendar months written notice of his intention to do so, the Company might, in lieu of giving notice, at any time determine it upon payment to Hudson of salary for one year calculated from the date of such determination. The agreement further provided that Hudson as Managing Director was to receive a salary of Rs. 1,250 a month, besides Director's fees and a commission upon the net profits, so that his total remuneration might not be less than Rs. 1,500 a month. On the 30 May 1906, the Company appointed Octavius Steel & Co. as their attorney but by this deed it was expressly provided that the power-of-attorney previously granted by the Company to Hudson on the 29 June 1905, and all powers executed by him thereunder, were deemed to remain in full force and effect, until they were revoked by the Company or by the new attorneys under the power vested in them. Meanwhile, there had been a correspondence between Secretary of the Company and Hudson as to the status of the latter, and on the 20 July 1906 Hudson resigned his Managing Directorship. On the 22 January, 1908, the Company executed two mortgages, the first in favour of the present plaintiffs, John Pierpont Morgan and others, and the second in favour of Harman Klienwort and others. The first mortgagees, under the terms of the contract with them which we are informed was in the nature of an English mortgage, were entitled to possession upon default of payment and therefore to have a Receiver appointed in respect of the mortgaged premises at any time by an application to Court. On the 9 of May 1908, the first mortgagees commenced an action to enforce their security and made an application under Section 503 of the Civil Procedure Code for the appointment of a Receiver for the better management of the mortgaged properties. The Subordinate Judge made an order for the appointment of a Receiver on that very day, and nominated Mr. Clarke, of the firm of Octavius Steel & Co. as a fit and proper person. On the 12 May 1908, the District Judge sanctioned the nomination, and Mr. Clarke was appointed with power of delegation for local management and power to arrange finances. The Receiver was called upon to furnish security to the extent of three lakhs of rupees within seven days. On the 19 May following, the period within which the security was to be furnished was extended to the 26th May, and on the latter date, it was reported that security had been furnished. The security was approved and Mr. Clarke was authorized to commence work as Receiver in accordance with the order of the 12 May. Meanwhile, on the 14 May, the Company went into liquidation, and on the 26 May 1908, the services of Hudson were dispensed with. The Receiver took possession of all the mortgaged properties, excepting the portions now in dispute which were in the possession of Hudson. The latter on the 22 June, 1908 informed the Receiver that he claimed a lien on the properties in his possession under Secs.217 and 221 of the Indian Contract Act, for one year's salary due to him, as his services had been dispensed with without notice, as also for the salary and allowances due to him from the 1 to the 26 of May 1908. The Receiver reported the matter to the Court, and upon the materials placed before the Subordinate Judge in the affidavits of both sides, he directed on the 11 December 1908 that Hudson should make over the properties in his custody to the Receiver. Hudson has now appealed to this Court, and on his behalf, the validity of the order has been attacked substantially on two grounds; namely, first, that as he is not a party to the mortgage suit, it is not competent to the Court to deprive him of possession of the properties in dispute; secondly, that, if the Court has jurisdiction to deal with the matter, he has a statutory lien upon the properties, which entitles him to retain possession as against the Receiver. In answer to these contentions, it has been argued on behalf of the respondents, first, that the appeal is incompetent, inasmuch as the first order of the 12 May 1908, by which the Receiver was appointed, was not challenged in time; secondly, that the position of the appellant is not that of an agent of the Company but of an officer or servant, that he has consequently no juridical possession, and that his custody of the properties which undoubtedly belonged to the mortgagors is on their behalf and is liable to be terminated at the instance of the Receiver appointed in the mortgage suit; and thirdly, that even if Hudson be assumed to have a possessory lien, his right to possession cannot prevail as against the mortgagees or the Receiver appointed by the Court at their instance.

(3.) As regards the preliminary objection taken on behalf of the respondents, we are of opinion that there is no substance in it. The order of the Subordinate Judge of the 11 December 1908, Under which the Receiver is authorized to remove Hudson and to take possession of the properties now in his custody, was undoubtedly made under Section 503, Clause (b) of the Code of 1882. That order is consequently appealable under Section 588, Clause (24). It was not necessary for the appellant to challenge the order of the 12 May 1908 by which the Receiver was appointed. He was no party to that order, nor does it appear that he had any notice of it. He was not affected by the proceedings for the appointment of a Receiver, till the latter made an attempt to deprive him of possession of the disputed properties. As soon as there was an adjudication between him and the Receiver as to the title of -the latter to remove him from possession, he became entitled to question the validity of the adverse order. We must consequently overrule the preliminary objection and consider the case on the merits.