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PETITIONER: EVEREST COAL COMPANY (P) LTD.

       Vs.

RESPONDENT: STATE OF BIHAR & ORS.

DATE OF JUDGMENT29/09/1977

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. SINGH, JASWANT

CITATION:  1977 AIR 2304            1978 SCR  (1) 571  1978 SCC  (1)  12  CITATOR INFO :  R          1984 SC1471  (25,50)

ACT: Civil Procedure Code (Act V of 1908), Order XL-Leave to  sue the  Receiver,  whether a  must-Principle  behind  obtaining prior leave of the court which appointed the Receiver before siting the Receiver, explained.

HEADNOTE: The  appellant-plaintiff  entered into a contract  with  the Receiver  defendant State relating to a coal mine which  had come within his Receivership in an earlier suit.  While  the appellant  was  working the mine under  the contract,  the Receiver-defendant  after  obtaining the permission  of  the court  which  appointed  him  but  without  notice  to   the appellant,  cancelled the contract.  The appellant sued  the Receiver in damages after giving notice u/s. 80 C.P.C.,  but without  taking  the  prior permission of  the  court  which appointed  the  Receiver.  Although he failed to  apply  for leave of the court before suing the Receiver, he made up for it by applying to the said court for permission to  continue the  litigation against the Receiver.  The  application  was rejected  on the view that since the petitioner had  already filed  a  suit without leave of the court, the  question  of grant  of  permission  to  continue it  did  not  arise.   A revision to the High Court was dismissed in limine. Allowing  the appeal by special leave and granting leave  to the  appellant  to  prosecute  his  suit  against  Receiver- respondent, the court, HELD : (1) The principle that prior leave of the court which appointed  the  Receiver  is  necessary  before  suing   the Receiver  is  based  on ’contempt’ of court.   The  rule  is merely  to prevent contempt.  Leave obtained before the  lis terminates is a solvent of contempt.  The infirmity does not bear upon the jurisdiction of the trying court or the  cause of  action.   It  is  peripheral.   The  property  being  in custodian  legible, the court’s leave, liberally granted  is needed.   It is the court appointing the Receiver that  can, grant  leave.   If  a suit  prosecuted  without  such  leave culminates  in a decree, it is liable to be set aside.  [575 B-E] (2)When a court puts a Receiver in possession of property,

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the  property comes under court custody, the Receiver  being merely an officer or agent of the court.  Any obstruction or interference with the court’s possession sounds in  contempt of that court.  Any legal action in respect of that property is in a sense such an interference and invites the  contempt penalty  of  likely  invalidation  of  the  suit  or   other proceedings.   But, if either be ore starting the action  or during  its  continuance, the party takes the leave  of  the court,  the sin is absolved and the proceeding may  continue to  a conclusion on the merits.  In the ordinary course,  no court is so prestige-conscious that it will stand in the way of  a  legitimate legal proceeding for redressal  or  relief against   its   receiver  unless  the  action   is   totally meritocrat, frivolous or vexatious or otherwise vitiated  by any  sinister factor.  Grant of leave is the  rule,  refusal the  exception.  After all, the court is not, in  the  usual run  of  cases, affected by a litigation which  settles  the rights of parties and the Receiver represents neither party, being an officer of the court.  For this reason,  ordinarily the  court accords permission to sue, or to  continue.   The jurisdiction  to grant leave is undoubted and inherent,  but not based on black letter, law in the sense of enacted  law. Any litigative disturbance of the court’s possession without its permission amounts to contempt of its authority; and the wages of contempt of court in this jurisdiction may well  be voidability of the whole proceeding.  Equally clearly, prior permission  of  the court appointing the Receiver is  not  a condition  precedent  to  the enforcement of  the  cause  of action.   Nor is it so grave a vice that later leave  sought and got before the decree has been passed will not purge it. If, before the suit terminates, the relevant court is  moved and  permission to sue or to prosecute further  is  granted, the  requirement of law is fulfilled.  Of course failure  to secure  such leave till the end of the lis may prove  fatal. [573 E-H, 574 A] 572 Pramatha Nath v. Ketra Nath (1905) 32 Cal. 270; Jamshedji v. Husseinbhai (1920) 44 Bom. 908, 58 I.C. 411, over-ruled. Banku Behari 15 Calcutta Weekly Notes 54, approved. OBSERVATION: When any proceeding comes before the court for  adjudication it  is desirable to decide the point instead  of  mystifying the  situation  by avoiding a clear-cut disposal as  in  the present case.  A stitch in time saves nine. [573 D]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2224  of 1977. Appeal  by Special Leave from the Judgment and  Order  dated 15-2-77 of the Patna High Court (Ranchi Bench) at Ranchi  in Civil Revision Appeal No. 24 of 1977. H.   R. Gokhale, and B. P. Singh for the Appellant. U.   P. Singh and S. N. Jha for the Respondent No. 1. The Judgment of the Court was delivered by KRISHNA  IYFR, J. This appeal, where we have granted  leave, can be disposed of right away, now that we have heard  brief submissions  from both sides.  The facts are few, the  issue is   single  and  the  solution  simple;  but   to   silence conflicting voices from different High Courts and to clarify the law for the sake of certainty, we have chosen to make  a short  speaking  order.  The neat little  legal  point  that arises is this : Can the court appointing a receiver to take charge of properties, grant leave to continue a suit against

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him  when  a  third. party wants to  prosecute  such  action initiated  without  such permission ? If so,  what  are  the guidelines for grant of such leave ? The  appellant is the plaintiff in a suit instituted by  him against  respondent  1  (defendant in the  suit)  who  is  a receiver  appointed  by the court under O.40,, r.  1  C.P.C. Briefly  set out, the case of the plaintiff is that  he  had entered into a contract with the Receiver defendant relating to  a  coal  mine which had come  within  his  Receivership. While  he  was  working the mine  under  the  contract,  the Receiver-defendant,  after obtaining the permission  of  the court  which  appointed  him,  but  without  notice  to  the plaintiff-appellant, cancelled the contract  wrongfully-such is his case.  Thereupon, the appellant sued the Receiver  in damages  after giving notice under S. 80 CPC.   However,  he somehow failed to move the court for cancelling the  earlier order  passed  to his prejudice in which  case  perhaps  the court   might  have  reconsidered  the  order   and   issued directions to his Receiver.  We are not concerned with  that aspect  of  the  case  and we do not  propose  to  make  any speculative  observations thereon.  Although the  plaintiff- appellant  omitted to get leave from the court before  suing the  Receiver,  he made up for it, on  second  thoughts,  by applying  to  the  Court  for  permission  to  continue  the litigation against the Receiver.  When that proceeding  came up for hearing the learned Subordinate Judge dismissed it on the view that since the petitioner had already filed a  suit without leave of the court, the question of grant of permis- sion to continue it did not arise.  The court’s observations which we 573 think are both unhelpful and erroneous and keeps the parties in suspense, are couched in these words :               "if the petitioner has already filed the  suit               without  leave  of the court, he  has  already               taken  the risk and now the question does  not               arise  for  giving a fresh permission  in  the               matter of continuing the suit.  Because of the               T.S. 74 of 1975 already instituted, the prayer               fog  permission to continue the same does  not               arise as it is infructuous ... Rejected. A revision to the High Court did not improve matters because the  application  was dismissed in limine, with  the  rather innocuously wise statement :               "The  law will have its own course and  if  in               law  the  petitioner need not have  taken  the               permission of the court for continuance of the               title suit, no observation made by the learned               Subordinate Judge can arm the petitioner." In our view, when any proceeding comes before the court  for adjudication it is desirable to decide the point instead  of mystyfying  the situation by avoiding a clear-cut  disposal. A stitch in time saves nine. The  laconic  affirmance  by the High  Court  of  the  trial court’s order has necessitated the appellant’s challenge  of its  propriety and legality.  Instead of leaving the  matter ’asfrologically’  vague and futuristically fluid,  we  shall state   the  legal  position  and  settle  the   proposition governing this and similar Situations.  When a court puts  a Receiver in possession of property, the property comes under court custody, the Receiver being merely an officer or agent of  the  court.  Any obstruction or  interference  with  the court’s possession sounds in  contempt  of that  court.  Any legal action inrespect of that property      is  in   a sense such as interference and invitesthe contempt penalty

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of   likely  invalidation of the suit or other  proceedings, But  if either      before   starting  the  action   or during its continuance the party takes    the  leave   of the court, the sin is absolvedand  the  proceeding  may continue  to  a conclusion on the merits.  In  the  ordinary court is so prestige-conscious that it will stand in the way of  a  course, no legitimate legal proceeding for  redressal or relief against its receiver unless the action is  totally meritless,  frivolous or vexatious or otherwise vitiated  by any  sinister factor.  Grant of leave is the  rule,  refusal the  exception.  After all, the court is not, in  the  usual run  of  cases, affected by a litigation which  settles  the rights of parties and the Receiver represents neither party, being an officer of the court.  For this reason,  ordinarily the  court accords permission to sue, or to  continue.   The jurisdiction  to grant leave is undoubted and inherent,  but not  based on blackletter law in the sense of  enacted  law. Any  litigative  disturbance  of  the  court’s.   possession without its permission amounts to contempt of its authority; and the wages of contempt of court in this jurisdiction  may well  be  voidability  of  the  whole  proceeding.   Equally clearly,  prior  permission  of  the  court  appointing  the Receiver is not a condition precedent to the enforcement  of the cause of action.  Nor is it 574 so  grave a vice that later leave sought and got before  the decree  has been passed will not purge it.  If,  before  the suit  terminates the relevant court is moved and  permission to  sue or to prosecute further is granted, the  requirement of  law  is fulfilled.  Of course, failure  to  secure  such leave till the end of the lis may prove fatal. This,  in  short, is the law which has  been  stabilised  by Indian  decisions  although  inherited  from  principles  of English  law.  In a sense Indian, English and even  American jurisprudence lend support to this law. We  now  proceed  to  some  citations,  text-book-wise   and precedentwise and indicating the conflict to eliminate which is the object of this  ruling. Mulla, with characteristic clarity, has condensed the  whole correctly :               "A receiver cannot sue or be sued except  with               the  leave  of  the  Court  by  which  he  was               appointed receiver.  A party feeling aggrieved               by the conduct of a receiver may seek  redress               against  him in the very suit in which he  was               appointed receiver, or he may bring a separate               suit  against  the receiver in which  case  he               must obtain the leave of the court"               x              x              x              x               x               "There   is  no  statutory   provision   which               requires  a  party to take the  leave  of  the               Court  to sue a receiver.  The rule  has  come               down  to us as a part of the rules of  equity,               binding  upon  all courts of Justice  in  this               country.   It  is  a rule  based  upon  public               policy which requires that when the Court  has               assumed  possession  of  a  property  in   the               interest  of  the  litigants  before  it,  the               authority of the Court is not to be obstructed               by suits designed to disturb the possession of               the  Court.  The institution of such suits  is               in  the  eye  of the law  a  contempt  of  the               authority  of  the Court, and  therefore,  the               party contemplating such a suit is required to

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             take  the leave of the Court so as to  absolve               himself  from that charge.  The grant of  such               leave  is  made not in exercise of  any  power               conferred  by statute, but in the exercise  of               the inherent power which every Court possesses               to  prevent acts which constitute or are  akin               to an abuse of its authority."               x              x             x               x               x               "In Pramatha Nath v. Katra Nath (1905) 32 Cal.               270  Bodilly  J. held that the  leave  of  the               Court  to  sue  a  receiver  was  a  condition               precedent  to  right to sue, and that  if  the               leave  was not obtained before suit, it  could               not  be granted subsequent to the  institution               of the suit and the suit should be  dismissed.               This decision was dissented from in subsequent               Calcutta  cases  where it was  held  that  the               leave   may   be  granted   even   after   the               institution of the suit."               x              x               575               "Leave  subsequently obtained at the  time  of               realising rents directly from the tenants will               suffice.   In  a  Bombay  ease  (Jamshedji  v.               Hussainbhai,  1920 44 Bom. 908, 58  I.C.  411)               Pratt,  J., after an exhaustive review of  the               case-law  on  the subject, came  to  the  same               conclusion;   the  learned  judge  held   that               failure   to   obtain  leave  prior   to   the               institution   of   the  suit  was   cured   by               subsequent leave."               (Mulla, Vol. 11, pp. 1533-34, 13th Edn.  CPC)               Since  the principle is based on  contempt  of               court, statutory follow up. actions are carved               out  as exceptions (suits under  0.21,  0.63).               Likewise,  where no relief is claimed  against               the receiver.  Similarly, whether the receiver               was  appointed  in  a collusive  suit  or  the               order,  itself was unjustified are beside  the               point.  The property being in custodian legis,               the   court’s  leave,  liberally  granted   is               needed.   It  is  the  court  appointing   the               receiver  that  can grant leave.   If  a  suit               prosecuted without such leave culminates in  a               decree it is liable to be set aside.               Once  the jurisprudential root of the  law  is               grasped,  that the rule is merely  to  prevent               contempt, the many problems proliferating from               the  appointment  of  a  receiver  and   legal               proceedings against him without the appointing               court’s  permission can be sorted out  without               converting the failure to get sanction  before               institution  into a major, even  fussy  issue.               Leave obtained before the lis terminates is  a               solvent  of the contempt.  The infirmity  does               not  bear upon the jurisdiction of the  trying               court   or  the  cause  of  action.    It   is               perepheral.               The  extreme view taken in Pramatha Nath  (ILR               32  Calcutta  270)  is not  good  law.   Banku               Behari (15 CWN 54) a later ruling of the  same               High Court, has struck the correct note :               "But  we  are unable to appreciate  upon  what               intelligible  principle  the position  can  be

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             defended  that  because  the  suit  has   been               instituted  without leave Previously  obtained               it must necessarily be dismissed, and that  it               is  not open to the Court to stay  proceedings               in  the  suit  with  a  view  of  enable   the               Plaintiff  to  obtain leave of  the  Court  to               proceed with the suit against the Receiver." Bombay and Madras, Kerala and Mysore, have claimed in,  some going  into  long  erudition, others  readily  granting  the position.  The standard commentaries on the C.P.C. (Mulla as well as A.I.R.) concur in this view, footnoting the flow  of pan-Indian case-law. The  law  in  this branch, though  based  on  Anglo-American thought,  has  a legitimacy when viewed as contempt  of  the court’s  authority.   Once amends are made  by  later  leave being  obtained,  the  gravamen is gone  and  the  suit  can proceed.   The pity is that sometimes even such  points  are expanded  into  important questions calculated  to  protract Indian   litigation   already   suffering   from   unhealthy longevity. 576 A  pragmatic  view,  not  theoretical  perfection,  is   the corrective.  The leave should have been given. We  allow the appeal-in the hope that such an objection  may not  become  a dilatory chapter in  other  litigations.   We grant  leave to the appellant to prosecute his suit  against the  Receiver-respondent.   The  parties  will  bear   their respective  costs  in  this  avoidable  adventure,  but  the respondent will be free to urge all his other contentions to meet the plaintiff’s claim. S.R. Appeal allowed. 577