w w w . L a w y e r S e r v i c e s . i n

Nihalchand L.Jai Narain v/s Ram Niwas Munna Lal

    Civil Writ 2629 of 1967

    Decided On, 24 April 1968

    At, High Court of Punjab and Haryana


    For the Appearing Parties: A.S. Anand, Ashok Bhan, J.N. Kaushal, P.C. Jain, Advocates.

Judgment Text

(1.) THIS is defendants' appeal from the order of the trial Court passed under Order 40 Rule 1 of the Code of Civil Procedure directing the appointment of a receiver pending trial.

(2.) THE facts giving rise to this litigation are that the plaintiff had instituted a suit claiming several reliefs against the defendants including specific performance of an agreement compelling the defendants to execute a deed of partnership, dissolution of partnership and alternatively for a decree for a sum of Rs. 1,20,000. The plaintiff's case is that he had advanced up to 8th of August, 1966, a sum of Rs. 85,000 to defendants 1 and 3. On 8th of August, 1966, two agreements were entered into between the plaintiff on the one side and Nihal Chand on behalf of himself and as mukhtiar-i-am of Parma Nand, his brother-in-law, admitting the plaintiff into partnership and acknowledging receipt of Rs. 85. 000. The partnership was for running cinema business on land said to be owned by the defendants and funds to be supplied by the plaintiff. It was stated in the agreement of 8-8-1966 that the plaintiff had entered into partnership with Nihal Chand and Parma Nand for the cinema business and had been advancing from time to time a sum amounting to Rs. 85,000 for construction of the cinema building and for machinery etc. The share of the plaintiff is 0. 30p in a rupee and the amount was advanced towards his contribution as partner. If within a month of the date of the agreement, a deed of partnership was not got executed and registered, then the plaintiff would have the right to recover the sum of Rs. 85,000 with interest at 12 per cent besides costs and damages. He also would have the right of getting the agreement specifically enforced. It was alleged by the plaintiff that he later on invested a further sum of Rs. 12,000. As the defendants would not recognise him as a partner and would not execute deed of partnership he sued for a declaration that he was partner in the firm to the extent of 0. 30 P. in a rupee as his share and also sought perpetual injunction restraining defendants from running the concern and alienating the partnership property without his consent. This suit is still pending.

(3.) ON 24th of August, 1967, the present suit was instituted. On the same date, an application was also made for the appointment of ad interim receiver. In their written statement, the defendants denied partnership and stated that the plaintiff had deposited a sum of Rs. 37,325 only by way of a loan. On 8th of September, 1966, the plaintiff was owed a sum of Rupees 39,500 only. The defendants maintained that the agreements of 8th of August, 1966, were later on cancelled and the plaintiff had relinquished all hip rights (4.) THE trial Court after hearing the parties confirmed its earlier ad interim order appointing Shri Udhmi Ram. Advocate, Narnaul as receiver as to the partnership property of Prabhat Talkies in dispute and its assets till further orders. As at the time of the passing of the order. Prabhat Talkies had not started running he fixed rs. 60 per mensem as the fee of the receiver to be paid initially by the plaintiff and later to he ad justed as directed by the Court. This order has now been questioned in first appeal before me.

(5.) IN allowing the application and pas-sing the order appointing receiver, the trial court was influenced by the fact that the two agreements of 8th of August, 1966 set up by the plaintiff, stood tacitly admitted by the defendants and it was admitted in them that the plaintiff Ram Niwas was a partner in the concern having already invested Rs. 85,000 in it. Applying the test of appointment of a receiver in the case being just and convenient, the trial Court was influenced by the fact that the defendants did not deny the agreements of 8th of August, 1966, in which almost the entire case of the plaintiff was admitted and he was further influenced by the defendants' denial of the plaintiff's status as owner as a circumstance in appointing receiver. The trial Court considered the fact that the plaintiff's title to being a partner was denied by the defendants and this was an attempt made by them to exclude the plaintiff from the management of the concern. Prima facie the lower Court found that the plaintiff was admitted into partnership and had invested large amounts in the business. This conduct of the defendants, in the view of the trial Court, was a Rood ground for appointment of a receiver for preservation of the entire property and assets of the concern until the parties' rights are finally adjudicated upon. (6.) I have heard lengthy arguments from the parties learned counsel. The contention of the defendants-appellants is that the plaintiff is to be deemed as a partner who had advanced money to the defendants. He was just a money lender and not a partner. No case was, therefore, made out for assuming the existence of partnership and, therefore, for the appointment of a receiver Learned counsel for the appellants in the main rested his case on the observations made in Bhagawan ram Kairi v. Radhika Ranjan Das, AIR 1953 Assam 25 and T. Krishnaswamy chetty v. C. Thangavelu Chetty AIR 1955 Mad 430. The Bench in the Assam case observed that in a case for dissolution of partnership where the question was whether dissolution could be ordered or not the status quo ought not to be interfered with merely because there were differences between the partners and one of the partners had prayed for dissolution of the partnership. On the facts of that case, the trial Court had found that it was neither just nor convenient to appoint a receiver and (sic)sam High Court had affirmed that decision. It was conceded that a well grounded fear that the property in dispute would be (sic) ted or damaged or that irreparable harm might be done to it unless the Court extended to it its protection, might afford necessary justification for the appointment of a receiver. The trial Court before which this decision was also cited was of the view that it was distinguishable as in that case the title of the plaintiff as a partner was not denied whereas in the instant case, the defendants' contention was that the plaintiff was not a partner. Prima facie, the trial Court felt satisfied that the plaintiff had been admitted to the partnership and had further invested large amounts in the business. This circumstance was considered a justification for the appointment of receiver. I agree that the decision of the High court of Assam is distinguishable and does not govern the facts and circumstances of the instant case.

(7.) IN Madras case, a learned Single Judge of that Court had enunciated five principles which could be described as the "panch Sadachar" of our Courts exercising equity jurisdiction in appointing receivers. These were: (1) The appointment of a receiver pending a suit is a matter resting in the sound and judicial discretion of the Court taking into account all the circumstances of the case and for the ends of justice and for protecting the rights of the parties interested and in the absence of there being no other adequate remedy.

(2) The Court should not appoint a receiver except on proof by the plaintiff that prima facie he has excellent chance of succeeding in the suit.

(3) The plaintiff must show some emergency or danger or loss calling for an immediate action. A Court will not appoint a receiver merely on the ground that it will do no harm.

(4) An order appointing a receiver will not be made where it has the effect of depriving a defendant of a de facto possession since that might cause irreparable wrong.

(5) The Court looks to the conduct of the party who makes the application and would usually refuse to interfere unless his conduct had been free from blame the above principles are unexceptionable and need being borne in mind. Barring possible exception of the fourth principle, the remaining four do not stand in the way of the plaintiff being granted his prayer for appointment of receiver Even the fourth principle when properly scrutinised will not stand in the way of the plaintiff getting his relief. The position of a partner is to be deemed the position of all the partners. It cannot, therefore, be said that the appointment of the receiver will be detrimental to the interest of the defendants. Moreover, this principle is not inflexible and depends upon the facts and circumstances of the particular case. I do not find anything stated in the decision of Madras High Court referred to above which is compulsive for denying the plaintiff's application for relief granted to him by the trial Court and for reversing the order under appeal.

(8.) THERE is one important consideration which I have to bear in mind and that is that a discretion exercised by the trial Court in the matter of appointment of a receiver after considering the facts of the case ought not to be interfered with in appeal unless it is shown that it was improperly exercised or that the determination was contrary to law. Reference may be made to a Division Bench decision of Tek Chand and Bhide JJ. in Firm Panlad Dass Bhagwan Dass v. Shanti sagar, AIR 1940 Lah 325 affirming an earlier decision of a Division Bench of that court in Amarnath v. Mt. Tehal Kaur. AIR 1922 Lah 444.

(9.) IN a case where partnership it made out prima facie and where the grievance of the plaintiff is that he had been excluded from the participation in the management, the appointment of a receiver would be justifiable, vide G. Ramchandravya v. Neth Iswaravya, AIR 1952 Hyd 139.

(10.) WHERE a partner excludes another from the management of the partnership affairs, there a case is made out for appointment of a receiver and this doctrine has been cited on even where the defendant contends that the plaintiff is not a partner or that he has no interest in the partnership assets, vide Peacock v. Peacock. (1808) 16 Ves Jun 49 Blakeney v. Dufaur, (1851) 15 Beav 40 and Wilson v. Greenwood. (1818) 1 Sw. 471 Reference may also be made to Lindlev on partnership. Twelfth Edition pages 562-563 and Kerr on Receivers. Thirteenth edition page 70.

(11.) IN the instant case, it is true that the defendants had denied there being A partnership but their own documents showed prima facie that there was in fact a partnership. (12.) THE considerations which determine the grant or refusal rest on well-known principles but no Court has been able to lay down unvarying and inflexible rules applying to all circumstances and eventualities. The facts of the actual case are of primary consideration which determine the exercise of the discretionary power. It is true that the power is exercised sparingly and with caution and circumspection where circumstances require a summary relief. A receiver is to be appointed only in a clear case and where there is necessity or occasion for the appointment appointment of a receiver must not be a mere weapon of coercion and the Courts do not exercise this discretion any power in the absence of a strong case. The discretion of the trial Court ought not to be disturbed where it is rested on a consideration of the facts and circumstances, bearing in mind the principles applicable.

(13.) A receiver may be appointed where there is a reasonable apprehension to the property, assets or income and are in danger of being injured misused or dissipated. The property should be preserved from loss or wastage so that the final relief may be effective. The appointment of (sic)eceiver in such circumstance does not result in have assesment to a party but protects the rights of the injured party by keeping the property intact. The counsel for the parties agree that the cinema has been running and screening pictures from December, 1967. The proceeds of the booking office are being realised exclusively by the defendants who deny that the plaintiff is entitled to any share of the income. In these circumstances, the funds In the form of the daily income of the cinema and other liquid assets need being preserved from misuse or malversation. The other property of the partnership has also to

Please Login To View The Full Judgment!

be safeguarded from injury or destruction and also from being alienated. (14.) APPLYING the well established principles governing appointment of receiver to the facts and circumstances of this case, I am of the view that the trial Court had arrived at a decision which is both just and convenient. I may, however, say that at the time of giving decision, the cinema had not started functioning and all that was required at the time was to appoint the receiver to take possession of the property which included building machinery and other assets. The duty of the receiver has now become more onerous and he has to see to the actual receipt of cash in the form of sale of tickets at every show. In view of this contingency, the order of the trial Court in respect of the appointment of receiver needs being modified. (15.) I will, therefore, direct the trial Court to appoint a competent receiver who may be able to devote definite time so that running of the cinema business may not suffer. This may be done after notice to the parties. The amount deposited by the defendants-appellants in compliance with the order of the Motion Bench dated 5th December. 1967, is allowed to be withdrawn. The costs shall abide the event. Parties are directed to appear in the trial Court on the 15th May. 1968. The records of the trial Court may be returned forthwith.