VASANTRAO LAXMANRAO SAHANE Vs. SANGHVI AMRITLAL BECHARLAL
LAWS(GJH)-1966-2-13
HIGH COURT OF GUJARAT
Decided on February 15,1966

VASANTRAO LAXMANRAO SAHANE Appellant
VERSUS
SANGHVI AMRITLAL BECHARLAL Respondents

JUDGEMENT

P. N. BHAGWATI - (1.) THIS Civil Revision Application raises an interesting question of law relating to the interpretation of Order 40 Rule 1 Clause (d) of the Code of Civil Procedure. The question is one of some importance a it is likely to arise frequently in cases where a receiver is appointed by the Court of property forming the subject matter of the suit or proceeding before it. In order to appreciate the question it is necessary to state briefly a few facts giving rise to the Revision Application.
(2.) BY a partnership agreement dated 9th December 1961 the petitioners and the respondent agreed to carry on business in partnership in the firm name of Ganesh Foundry Works. The business of the partnership was to manufacture and prepare machinery spare parts iron components and castings. The respondent was a financing partner who brought in a sum of Rs. 75 0 to the capital of the partnership while the petitioners were working partners who did not contribute a single pie. The petitioners as working partners attended to the business of the partnership and the accounts of the partnership were also written under the directions and supervision of the petitioners. In or about the beginning of 1964 however the respondent found that the petitioners were acting prejudicially to the interests of the partnership and it was not possible to continue the partnership with the petitioners. The respondent therefore addressed a notice dated 12th May 1964 to the petitioners dissolving the partnership and calling upon the petitioners to make up the accounts of the partnership. The partnership was admittedly a partnership-at-will and therefore it stood dissolved on 15th May 1964 being the date of the receipt of the notice by the petitioners. The respondent thereafter on 6th July 1964 filed a suit being Suit No. 926 of 1964 in the Court of the Civil Judge Senior Division Baroda against the petitioners for winding up the affairs of the partnership and recovery of the amount due at the foot of the accounts. After filing the suit the respondent made an application in the suit for appointment of a receiver of the assets of the partnership and also for an inventory of those assets. The learned trial Judge by an order dated 16th July 1964 granted the application and appointed a receiver to take charge of the partnership assets under Order 40 Rule 1 Clause (d) of the Code of Civil Procedure. The petitioners preferred an appeal against the order appointing receiver but the appeal was dismissed by the learned District Judge. Now according to the petitioners there was an arbitration clause in the partnership agreement and under the arbitration clause the parties were bound to refer the dispute forming the subject matter of the suit to arbitration. The petitioners therefore preferred an application to the learned trial Judge for stay of the suit under sec. 34 of the Arbitration Act. But that application was dismissed on the ground that the dispute forming the subject matter of the suit was not covered by any arbitration agreement. I am told that an appeal has been preferred by the petitioners against the order dismissing the application and that appeal is pending before the District Court. The petitioners also adopted another proceeding for enforcing the arbitration clause and that was an application under sec. 8 of the Arbitration Act but this application also met with the same fate. The receiver in the meanwhile took charge of the partnership assets, which consisted inter alia of machinery located in rented premises. The rent payable to the landlord in respect of the rented premises was running from month to month and the respondent had therefore to put the receiver in funds for the purpose of making payment of the amount of such rent. There was also a quota of pig iron which the partnership was entitled to receive and since this quota constituted a valuable assets of the partnership the respondent had to provide a sum of Rs. 6 815 Ps. to the receiver for securing this quota after obtaining the requisite order of the District Court in that behalf. There were also diverse other expenses recurring from month to month such as electric charges salaries of watchmen etc. Watch had to be incurred by the receiver and -since the receiver had no liquid cash the respondent had to put the receiver in funds for meeting the same. Having regard to the fact that recurring expenses were thus mounting from month to month and the machinery was also deteriorating by reason of disuse the respondent made an application to the learned trial Judge for an order that the receiver may be authorised to sell the assets of the partnership by public auction. The respondent pointed out in the application that he as a financing partner had invested Rs. 75 0 in the capital of the partnership prior to the institution of the suit and that subsequent to the suit also he had had to spend considerable amounts for putting the receiver in funds for the purpose of meeting the recurring expenses as also for the purpose of releasing the quota of pig iron and it was therefore necessary for the protection of his interests that the partnership assets should be sold without any further delay as otherwise his interests would be jeopardized and the money invested by him would be lost. The petitioners opposed the application and there were principally two grounds on which the petitioners contended that the application should not be granted. The first ground was that it was neither competent nor proper for the Court to order sale of the partnership assets before the passing of the final decree and the second ground was that in any event this was not a fit case in which such sale should be ordered. The learned trial Judge on a consideration of the relevant case law on the point came to the conclusion that there was nothing in the law of partnership which precluded the Court in an appropriate case from passing an order of sale of the partnership assets before the making of a final decree and it was therefore open to the Court to consider whether this was a fit case in which such order should be made. The learned trial Judge then proceeded to consider the merits of the application and on the merits the learned trial Judge held that there were special circumstances which required that the partnership assets should be sold before the passing of the final decree and he accordingly made the following order dated 22nd April 1965:- (1). The receiver is directed to sell off the assets of the partnership firm including the entire machinery the good-will the tenancy rights and all other properties of the firm by public auction. As far as possible by a single lot and if that is not possible then in different lots as the interests of the parties in his opinion so require. (2). The parties to the suit shall be entitled to bid at such public auction. (3). The sale by public auction shall be carried out as far as possible under the provisions of Civil Procedure Code. (4). The plaintiff shall deposit in Court the initial expenses for conducting the sale and on the completion of the sale the receiver shall pay back to the plaintiff the amount so deposited by him. The petitioners being aggrieved by this order preferred an appeal to the District Court. At the hearing of the appeal before the learned Assistant Judge a preliminary objection was raised on behalf of the respondent namely that no appeal lay against the order passed by the learned trial Judge and that the appeal preferred by the petitioners was therefore answer to the preliminary objection that the order passed by the learned trial Judge was an order under Order 40 Rule 1 Clause (d) and was therefore appealable under Order 43 Rule 1 Clause (s) of the Code of Civil Procedure. The learned Assistant Judge upheld the preliminary objection of the respondent and held that the order passed by the learned trial Judge did not confer power on the receiver to sell the partnership assets but merely contained a direction to him to sell the partnership assets and it was therefore not an order falling within Order 40 Rule 1 Clause (d) and no appeal lay against it under Order 43 Rule 1 Clause (s). Since in the view taken by the learned Assistant Judge the appeal preferred by the petitioners was incompetent it was not necessary for him to examine the merits of the order passed by the learned trial Judge but even so the learned Assistant Judge proceeded to discuss the merits of the controversy and came to the conclusion that the order of sale of partnership assets passed by the learned trial Judge was a proper order save in respect of one point and that related to the granting of liberty to the parties to bid at the public auction. The learned Assistant Judge felt that if the petitioners bid at the public auction they might be deemed to have submitted to the jurisdiction of the Court and that might prejudice their contention that the suit was liable to be stayed by reason of the arbitration clause in the partnership agreement and therefore the petitioners would be virtually precluded from bidding at the public auction and that would give an unfair and unjust advantage to the respondent in the matter of sale of the partnership assets. The learned Assistant Judge therefore held that the proper order should have been that neither party should be permitted to bid at the public auction and he observed that if he had taken the view that the appeal was maintainable he would have confirmed the order for sale of the partnership assets with the modification that the respondent should be precluded from bidding at the public; auction. The learned Assistant judge however in the view as to be maintainability of the appeal taken by him dismissed the appeal with costs. The petitioners thereupon preferred the present Revision Application challenging the order made by the learned Assistant Judge. The main question, which arises for determination in this Revision Application, is whether the appeal preferred by the petitioners against the order passed by the learned trial Judge was competent. Now it is well settled that an appeal is a creature of statute and there is no right of appeal unless it is given clearly and in express terms by statute. It would therefore have to be seen whether there is any provision statutory, which confers a right of appeal against the order, passed by the learned trial Judge. The petitioners relied on Order 43 Rule 1 Clause (s) and contended that an appeal lay against the order of the learned trial Judge under this provision. Order 43 Rule 1 Clause (s) provides that an appeal shall lie under sec. 104 from an order under Rule 1 or Rule 4 of Order 40 except an order under the proviso to sub-rule (2) of Rule 4 of that Order. It was not the case of the petitioners that the order passed by the learned trial Judge was an order under Order 40 Rule 4 and it is therefore not necessary to make any reference to that Rule. Order 40 Rule 1 sets out four kinds of orders, which may be made by the Court, and they are incorporated in Clauses (a) to (d). Clauses (a) to (c) are not material for the purpose of the present Revision Application since no reliance was placed on any of them on behalf of the petitioners. The only clause relied on was Clause (d) which fully read runs as follows:- 1 (i) Where it appears to the Court to be just and convenient. the Court may by order (d) confer upon the receiver all such powers as bringing and defending suits and for the realization management protection preservation and improvement of the property the collection of the rents and profits thereof the application and disposal of such rents and profits and the execution of documents as the owner himself has or such of those powers as the Court thinks fit. The petitioners contended that the order passed by the learned trial Judge conferred power on the receiver to sell the partnership assets and was therefore an order falling within Order 40 Rule 1 Clause (d) and consequently it was appealable under Order 43 Rule 1 Clause (s). The respondent however disputed the validity of this contention and urged that the order of the learned trial Judge merely gave a direction to the receiver to sell the partnership assets and did not confer any power on him and it was therefore not an order within the meaning of Order 40 Rule 1 Clause (d) which could be appealed against under Order 43 Rule 1 Clause (s). The question, which therefore arises, is whether the order passed by the learned trial Judge was an order conferring power on the receiver within the meaning of Order 40 Rule 1 Clause (d) and that depends on the true construction of that Clause.
(3.) IT is clear on a plain reading of Order 40 Rule 1 Clause (d) that this clause contemplates an order conferring upon the receiver all such powers in relation to various matters as the owner himself has or such of those powers as the Court thinks fit. But the question is what is the true meaning of the expression confer upon the receiver all such powers. The respondent contended that conferment of power on the receiver implies that some discretion is left with the receiver to decide for himself whether he would exercise the power in a particular set of circumstances but where as in the present case only a direction is given which the receiver is bound to carry out it would not be possible to say that any power is conferred on the receiver within the meaning of Order 40 Rule 1 Clause (d). The respondent in support of this contention leaned heavily on a decision of a Division Bench of the Rajasthan High Court in Ajit Singh v. Yamuna Devi A. I. R. 1953 Rajasthan 121. Now it is undoubtedly true that in this case a Division Bench of the Rajasthan High Court held that Clause (d) refers to those cases where powers are conferred by the Court on the receiver and conferment of powers implies that the receiver is left with the discretion to decide for himself whether he would exercise those powers in a particular set of circumstances but where the Court merely passes an order or gives a direction which the receiver is bound to comply with it cannot be said that any power is being conferred on the receiver within the meaning of Clause (d). This decision on would certainly appear to support the contention of the respondent but with the greatest respect to the learned Judges who decided this case I find myself unable to subscribe to the reasoning on which the decision is based. 1 cannot assent to the broad proposition that conferment of power on the receiver must necessarily imply that the receiver is given the discretion to decide whether to exercise the power or not. To read the word power in the context of Clause (d) in such a narrow and constricted manner would be not only to refuse to give full meaning and effect to that word but also to deny the right of appeal in cases where it may be most needed and if denied might work grave injustice. The word power is I think used in the broad sense of authority or capacity to do an act and where an order made by the Court confers such authority or capacity on the receiver to do an act which otherwise he would not have authority or capacity to do it would be an order conferring power on the Receiver to do such act within the meaning of Clause (d) My reasons for saying so are as follows.;


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